Rational pricing
Assumption in financial economics / From Wikipedia, the free encyclopedia
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For other uses, see Rational.
Rational pricing is the assumption in financial economics that asset prices – and hence asset pricing models – will reflect the arbitrage-free price of the asset as any deviation from this price will be "arbitraged away". This assumption is useful in pricing fixed income securities, particularly bonds, and is fundamental to the pricing of derivative instruments.
This article possibly contains original research. (June 2014) |