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Question 17.15: What is meant by the law of one price, and what does it impl...

What is meant by the law of one price, and what does it imply about a package of securities and a given security that have the same payoff?

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The law of one price implies that assets that have similar payoffs, both in terms of expected returns and risk, should be priced the same; if they are not priced the same, there is an arbitrage opportunity.

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