Arbitrage Theory

0. Introduction.- 1. The Linear Structure of Capital Asset Pricing Models.- 1.1. The Basic Idea of Theories of Financial Asset Prices.- 1.2. Cash-Flow Analysis.- 1.3. The Classical CAPM.- 1.3.1. Some Assumptions and Notations.- 1.3.2. Mean-Variance Efficiency.- 1.3.3. The Valuation Formula and Related Issues.- 1.3.4. The CAPM Structure of Asset Returns.- 1.3.5. Synopsis of Results in the CAPM Theory.- 1.4. The CAPM-Version By Black.- 1.4.1. The Derivation of Valuation Formulas.- 1.4.2. The Structure of Asset Returns in BLACK'S Model.- 1.5. The CAPM-Version with Non-Marketable Income.- 1.5.1. The Derivation of Valuation Formulas.- 1.5.2. The Individual Portfolio Structure.- 1.6. The Segmented Markets Model.- 1.7. Synopsis of the Main Results.- The Role Arbitrage Played in the Described Asset Pricing Theories.- 2. Taxonomy of Arbitrage in Financial Markets.- 3. Modelling and First Consequences of Arbitrage and No-Arbitrage Conditions.- 3.1. Notational Conventions; Arbitration and Spreads.- 3.2. Arbitration and No Spreads: Results without Transaction Costs.- 3.3. Free Lunches.- 3.3.1. Concepts and Definitions.- 3.3.2. Transaction Costs and Free Lunches.- 4. No-Arbitrage Conditions and the Structure of Price Systems.- 4.1. The Law of One Price.- 4.2. Free Lunches and the Law of One Price.- 4.3. Valuation by Arbitrage.- 4.3.1. The General Concept.- 4.3.2. An Example: Two-State Option Pricing.- 4.4. The Structure of Asset Prices under No-Arbitrage Conditions.- 4.4.1. The Statement of No-Arbitrage Conditions.- 4.4.2. The Implications of "No Free Lunches" for the Two-State Option Pricing.- 4.4.3. The One-Period Case.- 4.4.4. The Multiperiod Case.- 5. The Structure of Asset Returns and Mean Variance Efficiency under No-Arbitrage Conditions.- 5.1. The Structure Of Asset Returns.- 5.2. Mean-Variance Efficiency.- 6. Some Selected Applications.- 6.1. Options.- 6.1.1. No Early Exercise of an American Call.- 6.1.2. Put-Call-Parity.- 6.1.3. The Valuation of Contingent Claims in Discrete Time.- 6.2. Forward ad Futures Contracts.- 6.2.1. Interest Rate Parity Theory of Foreign Exchange Rates.- 6.2.2. Forward and Futures Prices.- 6.3. Corporate Financial Policy.- 6.3.1. The Valuation of Levered Firms.- 6.3.2. The FISHER Separation Under Uncertainty.- 6.4. Arbitrage Theory And Ross's Arbitrage Pricing Theory.- List of Assumptions.- Index of Frequently Used Symbols.- References.