The idea that the price of a commodity denominated in a specific currency should be the same regardless of the country where the good is being sold. For instance, in a no-arbitrage context, the dollar price of a ton of copper should equal the Japanese yen price of a ton multiplied by the exchange rate “dollar/ yen”:

Dollar price= yen price × $/¥ exchange rate

Any discrepancy between the two sides of this equation would spur arbitrageurs into buying copper at the low price and selling it at the high price, pocketing the difference.