More generally, beginning with the work of Modigliani and Miller, it was fundamental to finance theory that, in the words of Myron Scholes, "the market will price assets such that the expected rates of return on assets of similar risk are equal." If the market did not do so, Modigliani, Miller, and their successors reasoned, "investors seeing these profit opportunities would soon arbitrage them away" (Scholes 1972, p. 182). LTCM's "relative value" arbitrage can be seen as precisely this kind of arbitrage.

Donald MacKenzie, An Engine, Not a Camera, loc. 1003