Expected Loss Interest-Adjustment Theorem

This paper proposes and analyses the following theorem: Every legal claim or award that includes interest rate adjustment also incorporates an implicit head of loss or counterclaim for the expected opportunity cost or time value of the underlying claim amount. This expected opportunity cost satisfies no-arbitrage when compared with the parallel interest rate market. The inflation and discounting of nominal damage awards forwards and backwards in time and the relationship between indemnity interest rates and equity are all examined