Nonnegative Wealth, Absence of Arbitrage, and Feasible Consumption Plans
AbstractA restriction to nonnegative wealth is sufficient to preclude all arbitrage opportunities in financial models that have risk neutral probabilities that are valid for all simple strategies. Imposing nonnegative wealth does not constrain agents from making the choice they would make under the standard integrability condition. This conclusion does not depend on whether the markets are complete.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal Review of Financial Studies.
Volume (Year): 1 (1988)
Issue (Month): 4 ()
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Other versions of this item:
- Philip H. Dybvig & Chi-fu Huang, 1988. "Nonnegative Wealth, Absence of Arbitrage, and Feasible Consumption Plans," Cowles Foundation Discussion Papers 860, Cowles Foundation for Research in Economics, Yale University.
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