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Re: Thanks for your support, Roger drymartini  04-21-2008, 11:51 AM | Post #2510253
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getting offered same bond from different sources with different yield to maturity differences doesnt violate Efficient market hypothesis (not the weak form at least). If it violates the "semi-strong" form or the strong form, i would have to spend more time on that so cant comment right at this time.

 what it does violate is one of the principles of arbitrage-theory, the Law of One price.

http://en.wikipedia.org/wiki/Law_of_one_price


 As we all know that if an opportunity of arbitrage exists and the profit to be made is more than the transaction costs involved then a single arbitrageur can eliminate all the mispricing all by himself because of the second principle of arbitrage, "no-investment" principle. Arbitrage allows to gain a riskless profit with no initial investment. therefore, the first person to identify the opportunity has the means to fully eliminate that one.

so we have to look in the context in which it was mentioned. 

Topics arbitrage bonds Market target View Complete Thread
 
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