Question

You are the managing director of the bond trading desk at JP Morgan Chase. After

getting to your corner office on Wall Street this morning, you turned on your Bloomberg terminal to see how the market interest rates change. As you were looking at positive market nominal interest quotes you look at every single morning, an amazing revelation crossed your mind: because of the absence of arbitrage, you know for sure that time travel will NEVER be invented. Why is that? Explain.

Answer 1

If time travel will ever be invented, people from the future would know the actual spot rates of future periods from now, till then. With that knowledge, they can travel back in time and make undue profits merely because they know the rates of the future.

Because nobody has made consistent and continuous undue arbitrage gains, we can be certain that time travel will never be invented.

To put it simply: Now it is 2019. If someone from 2025 comes back to 2019 (who, from 2025 knows all the historical prices until 2025) can make unlimited arbitrage gains in 2019. But because nobody has made any such unlimited profit, it is clear that it is because no one has been able to travel through time.