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A note on two notions of arbitrage

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  • Allouch, Nizar

Abstract

Since Hart's [5] and Werner's [10] seminal papers, several conditions have been proposed to show the existence of equilibrium in an asset exchange economy with short-selling. In this note, we discuss the relationship between two no-arbitrage conditions. The first condition is the assumption that the individually rational utility set U is compact, as considered by Dana, Le Van and Magnien [1]. The second is inconsequential arbitrage, introduced by Page, Wooders and Monteiro [9]. The main result of this comparison is to show that the inconsequential arbitrage condition is stronger than the assumption that U is compact

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 623.

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Length: 8 pages
Date of creation: 2001
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Handle: RePEc:wrk:warwec:623

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Keywords: Asset Market ; Short Selling ; Arbitrage;

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  1. Grandmont, Jean-Michel, 1977. "Temporary General Equilibrium Theory," Econometrica, Econometric Society, vol. 45(3), pages 535-72, April.
  2. Page, F.H.Jr. & Wooders, M.H. & Monteiro, P.K., 1999. "Inconsequential Arbitrage," The Warwick Economics Research Paper Series (TWERPS) 561, University of Warwick, Department of Economics.
  3. Hammond, Peter J., 1983. "Overlapping expectations and Hart's conditions for equilibrium in a securities model," Journal of Economic Theory, Elsevier, vol. 31(1), pages 170-175, October.
  4. Werner, Jan, 1987. "Arbitrage and the Existence of Competitive Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1403-18, November.
  5. Page, Frank Jr., 1987. "On equilibrium in Hart's securities exchange model," Journal of Economic Theory, Elsevier, vol. 41(2), pages 392-404, April.
  6. Hart, Oliver D., 1974. "On the existence of equilibrium in a securities model," Journal of Economic Theory, Elsevier, vol. 9(3), pages 293-311, November.
  7. Green, Jerry R, 1973. "Temporary General Equilibrium in a Sequential Trading Model with Spot and Futures Transactions," Econometrica, Econometric Society, vol. 41(6), pages 1103-23, November.
  8. Nielsen, Lars Tyge, 1989. "Asset Market Equilibrium with Short-Selling," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 467-73, July.
  9. Milne, Frank, 1980. "Short-Selling, Default Risk and the Existence of Equilibrium in a Securities Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 255-67, June.
  10. Allouch, Nizar, 2002. "An equilibrium existence result with short selling," Journal of Mathematical Economics, Elsevier, vol. 37(2), pages 81-94, April.
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