Nonnegative Wealth, Absence of Arbitrage, and Feasible Consumption Plans
A 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.
|Date of creation:||Feb 1988|
|Publication status:||Published in Review of Financial Studies (1988), 1: 377-401|
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References listed on IDEAS
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- Darrell Duffie & Chi-Fu Huang, 2005.
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World Scientific Publishing Co. Pte. Ltd..
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