X hits on this document

57 views

0 shares

0 downloads

0 comments

16 / 16

Separation Principle

The only arbitrage free price for a financial security is for price to equal the present value of the cash flows (expected to be) paid by that security.

This means that in an arbitrage free market the NPV of buying or selling financial securities is zero.

Every trade has a buyer and a seller, if the price is such that the NPV is not zero one party will object.

Therefore, a real investment project can be evaluated independently of the financing necessary to pursue it.

Document info
Document views57
Page views57
Page last viewedSun Jan 22 19:15:42 UTC 2017
Pages16
Paragraphs197
Words1100

Comments