If the fuels were perfect substitutes, oil prices would thus tend to be about 6 times natural gas prices.

FORBES: Oil And Natural Gas Prices Get Divorced

Investors do not regard assets in different currencies as perfect substitutes, nor do exchange rates always reflect inflation differentials.

ECONOMIST: Capital goes global

Although the euro will eliminate intra-European exchange-rate risk, it does not mean that German and Italian bonds become perfect substitutes.

ECONOMIST: The international euro | The

Not only must investors regard assets in different countries as perfect substitutes, but expected changes in exchange rates must also equal the expected inflation differential between two countries.

ECONOMIST: Capital goes global

If investors see British and American bonds as perfect substitutes, then the expected movements of their currencies against one another should equalise the differential between their interest rates.

ECONOMIST: Capital goes global