markets, price, finance, trade-financeIf two securities, trading on two different markets, are claims to the EXACT same set of cash flows, can they have different prices? For example, if there is much more volatility in one market, could investors require higher returns to compensate for this extra risk? Similarly, if one market is very illiquid, could an illiquidity premium apply to the security in that market? At the end of the day, investors of the securities in both markets get the same cash flows, so shouldn’t the price be identical?
I’m sure a more thorough answer is possible, but in the meantime one could look at http://en.wikipedia.org/wiki/Arbitrage
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