No Arbitrage For Existence
While
fostering my newfound penchant for the subject of economics, I came by a
concept that kindled my imagination towards a seemingly unrelated field of
philosophy. I harbor a school of thought
wherein I believe that every subject that we learn under an education system of
any time and space, every theory we study, every formula has an equivalent in
nature. That’s not a very queer idea as everything has at some point emerged
out of nature. Knowing that fact and linking it with another theory of nature
has made me believe that there has to be a reason behind why such theories as
the ones we study under Science or Economics or any subject for that matter should
work in our daily lives. Its nature’s way to teach us her laws in simpler and
less complex forms. I call these mammoth
brain wracking theories of modern education which take years of studying,
simple and less complex because however tough they may seem and whatever time
they take to be deciphered and understood by a brain, they can at least be
understood in a lifetime as opposed to the theories of life and nature which
take several life spans.
One such
theory I recently encountered was the theory of No Arbitrage. Its kernel is the
fact that there is no such thing as a riskless profit. It states that if you
invest in a cash flow that gives only positive returns in the future then it
has to be bought by spending equivalently and conversely if you sell a cash
flow that would earn the buyer positive returns in the future then he has to
have paid his dues for it. In other words there is no such thing as Something
for Nothing just as well as, luckily for us, there is no such thing as Nothing for
Something. The fact that such a theory when put forward by a spiritual person
or a spiritual tome faces disregard while the same theory in more complex terms
with x and y’s inside a book that reads a complicated title on its front cover
is accepted as if chiseled in bronze is amusing. The reason for that may be the
fact that its applications in our day to day lives is more evident in the form
that the books put forward than its applications in life in general. Perhaps
that’s where faith comes in, when you believe in a law that may not always seem
obvious.
This theory
can in simple words also be described as Law of Compensation. That one would be
compensated for every deed he or she commits, in perfect proportions is
difficult (though not impossible) to observe and believe, and to work in accord
to it, keeping it as a blue print for all actions that one takes and all
sacrifices that he or she makes should work out in one’s favour in the long run,
just like in Economics, where this theory is purely theoretical but ONLY
through its application, and working according to it can bestow profits. So for
all those times that I’ve heard from so many people how unjust their lives have
been, I believe they fail to see the bigger picture. They seem to have been
walking through a garden where they only remember the thorns pricking them and
conveniently forget about the roses. The
Universe is a perfect sphere, so what goes around will come around. Hence, no
mortal can ever have everlasting uncompensated state of high or low alike so
there is no Arbitrage for Existence.
