Law Of One Price

The law of one price states that two twinsies securities (the same ones) should cost the same price, regardless of where they're being sold, and regardless of the currency exchange rate, and assuming a free market (it gets more messy once you add on things like trade restrictions).

It’s true that, in the short-run, two securities that are otherwise identical have two different prices, say, on two different forex markets. The prices of these twin securities will be the same in the long-run though, because some investor will swoop in and make some money off of that price difference (i.e. arbitrage).

Thanks to investors who look for arbitrage opportunities, the law of one price exists (in the long-run). Investors who are arbitrageurs will buy the cheaper version of the asset and sell it in the market where the twin asset is being sold for a higher price. Bada bing, bada boom, everything’s the same price again.