How Does Arbitrage Help the Law of One Price

question 111

Essay

How does arbitrage help the Law of One Price?

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Definitions:

Emotions

Complex psychological states involving thoughts, feelings, physiological changes, and behaviors in response to stimuli.

Extinction

In behavioral psychology, the process by which a previously learned behavior is reduced and eventually disappears when reinforcement is no longer provided.

Reinforcement

In behavioral psychology, a concept that involves increasing the likelihood of a behavior by following it with a positive or removing a negative stimulus.

Memory

The cognitive process involving the encoding, storage, and retrieval of information, allowing individuals to learn from experience and adapt to new situations.