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Arbitrage And Information In A Sequential Economy With Many Credit Agencies

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  • Dale O. Stahl

Abstract

This paper augments the theoretical foundations of organized commodity futures markets and uncovers singular facts about arbitrage and the role of information. Using the term “credit agency” to embrace organized futures markets such as the Chicago Board of Trade as well as independent brokerage houses, we extend the extant theory of temporary equilibrium for an economy with a single credit agency to economies with many credit agencies. In the process, we find that arbitrage with no risk of bankruptcy and with perfect interagency trade information can be incompatible with equilibrium (exact or approximate). On the other hand, the usual regularity assumptions are sufficient for the existence of at least an approximate equilibrium, provided that interagency trade information is imperfect (or risky). However, such imperfect information limits arbitrage so different agencies can have different prices.

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  • Dale O. Stahl, 1995. "Arbitrage And Information In A Sequential Economy With Many Credit Agencies," Mathematical Finance, Wiley Blackwell, vol. 5(1), pages 33-54, January.
    • Handle: RePEc:bla:mathfi:v:5:y:1995:i:1:p:33-54
    DOI: 10.1111/j.1467-9965.1995.tb00100.x
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    Cited by:

    1. Fratini, Saverio M. & Levrero, Enrico Sergio & Ravagnani, Fabio, 2016. "Price expectations in neo-Walrasian equilibrium models: an overview," MPRA Paper 69515, University Library of Munich, Germany.

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