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Examples
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In any case, the really dubious assumption of M-M is not the no-arbitrage condition — none of the people you mentioned in recent history have been able to successfully arbitrage between vanilla stocks and bonds as far as anyone knows.
The Volokh Conspiracy » Greenspan’s ‘The Crisis’ and Modigliani and Miller 2010
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In any case, the really dubious assumption of M-M is not the no-arbitrage condition — none of the people you mentioned in recent history have been able to successfully arbitrage between vanilla stocks and bonds as far as anyone knows.
The Volokh Conspiracy » Greenspan’s ‘The Crisis’ and Modigliani and Miller 2010
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Accounting for a shift in term structure behavior with no-arbitrage and macro-finance models.
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Now a negative basis violates, in theory, the no-arbitrage rule: It means you can buy a bond, fully insure it, and lock in risk-free profits just by holding both the bond and the CDS to maturity.
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Third, use of the "no-arbitrage" model to price credit default swap spreads can be misleading, particularly in times of financial crisis.
Dealbreaker 2009
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Third, use of the "no-arbitrage" model to price credit default swap spreads can be misleading, particularly in times of financial crisis.
Dealbreaker 2009
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Amongst those resources were the idea of perfect hedging (or of a ‘replicating portfolio’, a portfolio whose returns would exactly match those of the derivative in all states of the world); no-arbitrage pricing (deriving prices from the argument that the only patterns of pricing that can be stable are those that give rise to no arbitrage opportunities); and a striking example of the use in economics of Itô’s stochastic calculus
History of Option Pricing, Arnold Kling | EconLog | Library of Economics and Liberty 2009
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Modigliani and Miller (1958) proved this” invariance” result, using for the first time, a no-arbitrage condition.
The Volokh Conspiracy » Greenspan’s ‘The Crisis’ and Modigliani and Miller 2010
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Modigliani and Miller 1958 proved this ”invariance” result, using for the first time, a no-arbitrage condition.
The Volokh Conspiracy » Greenspan’s ‘The Crisis’ and Modigliani and Miller 2010
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