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Equilibrium and arbitrage in incomplete asset markets with fixed prices

  • Herings, P. J. J.
  • Polemarchakis, H.

At arbitrary prices of commodities and assets, fix-price equilibria exist under weak assumptions: endowments need not satisfy an interiority condition, utility functions need only satisfy are very weak monotonicity requirement, and the asset return matrix allows for redundant assets. Prices of assets may permit arbitrage. At equilibrium, though restricted through endogenously determined trading constraints, arbitrage possibilities may persist; in an example, an individual holds an arbitrage portfolio.

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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 37 (2002)
Issue (Month): 2 (April)
Pages: 133-155

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Handle: RePEc:eee:mateco:v:37:y:2002:i:2:p:133-155
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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