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A note on two notions of arbitrage

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  • Nizar Allouch

    (University of Leicester)

Abstract

In the framework of economics models with unbounded short sales a number of different conditions limiting arbitrage opportunities have been introduced. Dana, Le Van and Magnien [JET.87(1999)169] appeal to the condition of compactness of the individually rational utility set and show that all prior conditions in the literature limiting arbitrage opportunities imply this compactness. More recently,Page, Wooders and Monteiro [JME.34(2000)439] introduced the condition of inconsequential arbitrage. In this note, we add to the conclusion of Dana, Le Van and Magnien [JET.87(1999)169] that inconsequential arbitrage implies the compactness of the individually rational utility set and also demonstrate that the converse does not hold.

Suggested Citation

  • Nizar Allouch, 2003. "A note on two notions of arbitrage," Economics Bulletin, AccessEcon, vol. 4(1), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-02d50001
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    References listed on IDEAS

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    1. Allouch, Nizar, 2002. "An equilibrium existence result with short selling," Journal of Mathematical Economics, Elsevier, vol. 37(2), pages 81-94, April.
    2. PageJr., Frank H. & Wooders, Myrna H. & Monteiro, Paulo K., 2000. "Inconsequential arbitrage," Journal of Mathematical Economics, Elsevier, vol. 34(4), pages 439-469, December.
    3. Werner, Jan, 1987. "Arbitrage and the Existence of Competitive Equilibrium," Econometrica, Econometric Society, vol. 55(6), pages 1403-1418, November.
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    5. 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 255-267, June.
    6. Page, Frank Jr., 1996. "Arbitrage and asset prices," Mathematical Social Sciences, Elsevier, vol. 31(3), pages 183-208, June.
    7. Lars Tyge Nielsen, 1989. "Asset Market Equilibrium with Short-Selling," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(3), pages 467-473.
    8. 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.
    9. Green, Jerry R, 1973. "Temporary General Equilibrium in a Sequential Trading Model with Spot and Futures Transactions," Econometrica, Econometric Society, vol. 41(6), pages 1103-1123, November.
    10. 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.
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    Cited by:

    1. Ha-Huy, Thai & Le Van, Cuong & Tran-Viet, Cuong, 2018. "Arbitrage and equilibrium in economies with short-selling and ambiguity," Journal of Mathematical Economics, Elsevier, vol. 76(C), pages 95-100.

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    More about this item

    Keywords

    Arbitrage;

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • G0 - Financial Economics - - General

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