Arbitrage and asset market equilibrium in infinite dimensional economies with short-selling and risk-averse expected utilities
AbstractWe consider a model with an inffnite number of states of nature, von Neumann - Morgenstern utilities, where agents have different probabil- ity beliefs and where short sells are allowed. We show that no-arbitrage conditions, deffned for ffnite dimensional asset markets models, are not sufficient to ensure existence of equilibrium in presence of an inffnite num- ber of states of nature. However, if the individually rational utility set U is compact, we obtain an equilibrium. We give conditions which imply the compactness of U. We give examples of non-existence of equilibrium when these conditions do not hold.
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Bibliographic InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-100.
Length: 23 pages
Date of creation: 25 Feb 2014
Date of revision:
asset market equilibrium; individually rational attainable al- locations; individually rational utility set; no-arbitrage prices; no-arbitrage condition.;
Other versions of this item:
- Thai Ha-Huy & Cuong Le Van, 2014. "Arbitrage and asset market equilibrium in finite dimensional economies with short-selling and risk-averse expected utilities," Working Papers 2014-122, Department of Research, Ipag Business School.
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- G1 - Financial Economics - - General Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-15 (All new papers)
- NEP-MIC-2014-03-15 (Microeconomics)
- NEP-UPT-2014-03-15 (Utility Models & Prospect Theory)
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