Rational pricing

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.

“Rational pricing” is strongly related to:

Short (finance) Arbitrage Risk-free interest rate Black–Scholes Discount Fundamental theorem of arbitrage-free pricing Risk-neutral measure Underlying Spot price Binomial options pricing model Forward contract Fixed income arbitrage Put–call parity Beta (finance) Investment Analysts Society of Southern Africa Underlying instrument Contango Law of one price Expected return Delta neutral Forward rate agreement Emanuel Derman Future value Zero-coupon bond Mark Rubinstein Reference rate Backwardation Forward price Bond credit rating Volatility arbitrage Nassim Nicholas Taleb Intrinsic value Fair value Continuous-time Markov process Counterparty Fixed rate bond Arbitrage pricing theory Homo economicus Swaption Strike price

External Searches:

Page Categories

Mathematical finance

Pricing

Helpful Links

The main article content on this page (titled: "Rational pricing") was retrieved on the fly from Wikipedia (i.e., your page access date equals the data retrieval date).

All article text on this website (VisWiki.com) derived from Wikipedia, is licenced under the terms of the GNU Free Documentation License. Article images, with the exception of video thumbnails, are entirely from Wikipedia, and their copyrights should follow accordingly. All videos and video thumbnails shown on this site are from YouTube. Other visual/semantic contents are mine.
Note to former VisualWikipedia users: The domain name VisualWikipedia.com has recently been renamed to VisWiki.com. I'll add more useful featrures here, so please update your bookmark accordingly :)