The law of one price is a subset of the concept of the Purchasing Power Parity. The law of one price states that the price of the same security and asset traded will have an identical price irrespective of their location. This is the case when the prices are expressed in terms of common currency and there is an existence of free competition.

The differences between the asset prices in different location eliminates due to the arbitrage opportunity whereas PPP that is the purchasing power parity states that the same price of the identical goods in two countries will lead to the same value of currencies.