The no-arbitrage price of any financial asset is

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The no-arbitrage price of any financial asset is the present value of all future cash flows received from the asset. This is because if the price of the asset was higher than its present value, an arbitrage opportunity would exist where investors could buy the asset at a lower price and receive a higher return on investment. Likewise, if the price was lower than the present value, investors could sell the asset at a higher price and receive a higher return on investment. Therefore, the no-arbitrage price ensures that the market is efficient and prices reflect the fair value of the asset.

The No-Arbitrage Price of Any Financial Asset Is