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What Is Rational Pricing

Rational pricing is a theory which serious investors should be familiar with. According to Investopedia, this theory states that “the market prices of assets will represent the arbitrage-free pricing level for those assets. This is based on the assumption that any deviation from arbitrage-free price levels for an asset will result in arbitrageurs immediately trading away the profit opportunity on the asset until it trades at an arbitrage-free price.”

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