DEFINITION of 'Law Of One Price'
The theory that the price of a given security, commodity or asset will have the same price when exchange rates are taken into consideration. The law of one price is another way of stating the concept of purchasing power parity.
INVESTOPEDIA EXPLAINS 'Law Of One Price'
The law of one price exists due to arbitrage opportunities. If the price of a security, commodity or asset is different in two different markets, then an arbitrageur will purchase the asset in the cheaper market and sell it where prices are higher.
When the purchasing power parity doesn't hold, arbitrage profits will persist until the price converges across markets.
RELATED TERMS

Exchange Rate
The price of a nation’s currency in terms of another currency. ... 
Gresham's Law
A monetary principle stating that "bad money drives out good." ... 
Moore's Law
An observation made by Intel cofounder Gordon Moore in 1965. ... 
Purchasing Power Parity  PPP
An economic theory that estimates the amount of adjustment needed ... 
Arbitrage
The simultaneous purchase and sale of an asset in order to profit ... 
Big Mac PPP
A survey done by The Economist that determines what a country's ...
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Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. ... Read Full Answer >> 
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