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Elimination of arbitrage states in asymmetric information models

Author

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  • Bernard Cornet

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, KU - University of Kansas [Lawrence])

  • Lionel de Boisdeffre

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In a financial economy with asymmetric information and incomplete markets, we study how agents, having no model of how equilibrium prices are determined, may still refine their information by eliminating sequentially "arbitrage state(s)", namely, the state (s) which would grant the agent an arbitrage, if realizable. This article provides a dual behavior of the one studied in Cornet and De Boisdeffre (2002).

Suggested Citation

  • Bernard Cornet & Lionel de Boisdeffre, 2009. "Elimination of arbitrage states in asymmetric information models," Post-Print halshs-00441895, HAL.
    • Handle: RePEc:hal:journl:halshs-00441895
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00441895
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    Keywords

    information revealed by prices; Arbitrage; incomplete markets; asymmetric information; information revealed by prices.; Marchés incomplets; information asymétrique; opportunité d'arbitrage.;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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