In economic theory a frictionless market is a financial market without transaction costs.[1] Friction is a type of market incompleteness. Every complete market is frictionless, but the converse does not hold. In a frictionless market the solvency cone is the halfspace normal to the unique price vector. The Black–Scholes model assumes a frictionless market.[2]

References

  1. "Frictionless Market - Investopedia". Retrieved October 14, 2011.
  2. Durbin, Michael (2010). All About Derivatives (2 ed.). McGraw-Hill Professional. p. 165. ISBN 978-0-07-174351-8.
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.