Fundamental theorem of asset pricing
The fundamental theorems of asset pricing (also: of arbitrage, of finance), in both financial economics and mathematical finance, provide necessary and sufficient conditions for a market to be arbitrage free, and for a market to be complete. An arbitrage opportunity is a way of making money with no initial investment without any possibility of loss. Though arbitrage opportunities do exist briefly in real life, it has been said that any sensible market model must avoid this type of profit. The first theorem is important in that it ensures a fundamental property of market models. Completeness  is a common property of market models (for instance the Black–Scholes model). A complete market is one in which every contingent claim can be replicated. Though this property is common in models, it is not always considered desirable or realistic. Discrete markets. In a discrete (i.e. finite state) market, the following hold: In more general markets. When stock price returns follow a single Brownian motion, there is a unique risk neutral measure. When the stock price process is assumed to follow a more general sigma-martingale or semimartingale, then the concept of arbitrage is too narrow, and a stronger  concept such as no free lunch with vanishing risk must be used to describe these opportunities in an infinite dimensional setting. References. Sources Further reading