---
title: "Lecture 11 Note"
author: "Yiming Gong"
date: "2021-08-06T03:54:47Z"
tags: [Market]
link: "https://bookdown.org/yg484/lec_11_note/"
length_weight: "1.5%"
pinned: false
---

This is the class note for lecture 11. [...] The idea behind the “no-arbitrage” principle can be summarized in a few words: there is no such thing as a free lunch. In other words, the financial markets will not allow you to get a risk-free profit. A simple example of arbitrage is when a foreign currency is traded on two markets with different exchange rates. Suppose that you can exchange euros to pounds in London at a rate of e1.15 per pound, and in Paris at e1.16 per pound. Then it would be possible to get a guaranteed profit by exchanging one pound for e1.16 in
Paris and then exchanging ...
