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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.
Rationalpricing is the assumption in financial economics that asset prices – and hence asset pricing models – will reflect the arbitrage-free price of...
either general equilibrium asset pricing or rational asset pricing, the latter corresponding to risk neutral pricing. Investment theory, which is near...
Psychological pricing (also price ending, charm pricing) is a pricing and marketing strategy based on the theory that certain prices have a psychological...
The forward price (or sometimes forward rate) is the agreed upon price of an asset in a forward contract. Using the rationalpricing assumption, for a...
present value terms. For an arbitrage proof of why this is the case, see Rationalpricing below. For an asset that pays known income, the relationship becomes:...
payable on the purchase price. Any other cost price would yield an arbitrage opportunity and riskless profit (see rationalpricing for the arbitrage mechanics)...
arbitrage pricing theory (APT) is a multi-factor model for asset pricing which relates various macro-economic (systematic) risk variables to the pricing of financial...
probabilities, q s {\displaystyle q_{s}} , given n prices. For a simplified example see Rationalpricing § Risk neutral valuation, where the economy has...
single, equal price per homogeneous good in all locations.[additional citation(s) needed] For further discussion, see Rationalpricing. Commodities can...
Binomial options pricing model; Trinomial tree Monte Carlo methods for option pricing Finite difference methods for option pricing More recently, the...
notion of a replicating portfolio is fundamental to rationalpricing, which assumes that market prices are arbitrage-free – concretely, arbitrage opportunities...
neutral valuation. Here the price of the option is its discounted expected value; see risk neutrality and rationalpricing. The technique applied then...
will then quickly reprice to its correct level. Here, we apply the rationalpricing logic relating to "Assets with identical cash flows". In detail: (1)...
Post-autistic economics Rational agent Rational choice theory Rationalpricing Superrationality Bounded rationalityRationality and power List of alternative...
Rational choice theory refers to a set of guidelines that help understand economic and social behaviour. The theory originated in the eighteenth century...
XVA exposures. Historically, (OTC) derivative pricing has relied on the Black–Scholes risk neutral pricing framework which assumes that funding is available...
Quantity theory of money Rate of return pricing – Rational choice theory – Rational expectations – Rationalpricing – Reaganomics – Real business-cycle theory...
The concept of rational expectations was first introduced by John F. Muth in his paper "Rational Expectations and the Theory of Price Movements" published...
(b) Arbitrage arguments then allow for the option's price to be estimated today; see Rationalpricing § Delta hedging. (c) When hedging of this sort is...
arguments ("rationalpricing") apply when the deliverable asset exists in plentiful supply or may be freely created. Here, the forward price represents...
price index, producer price index, and GDP deflator. price level price point price–specie flow mechanism price war pricingpricing science The application...
a more accurate price can be obtained than if the price is calculated with a present-value pricing approach. Arbitrage-free pricing is used for bond...
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