IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-02938862.html
   My bibliography  Save this paper

Characterizing Revealing and Arbitrage-Free Financial Markets

Author

Listed:
  • Lionel De Boisdeffre

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

Abstract

Radner (Econometrica 47: 655-678, 1979) introduces a general equilibrium model of asymmetric information where "agents have a 'model' or 'expectations' of how equilibrium prices are determined". They would only infer private information of other agents from comparing actual prices and price forecasts with their theoretical values at a price revealing equilibrium. De Boisde¤re (Economic Theory Bulletin 4(1), 2016) shows that agents having private anticipations and no price model may still update their beliefs from observing trade on financial markets, until all arbitrage is precluded. The informational refinement consists in successively eliminating anticipations, which would grant an unlimited arbitrage, if realizable. Thus, agents simply observe, respond and learn from arbitrage opportunities on portfolios, as they would do on actual markets. This model is consistent with all kinds of assets and uncountably many forecasts. We now study markets, which preclude arbitrage, and show the information markets may convey depends on the span of asset payo¤s in agents' commonly expected states. We provide conditions, under which markets are non informative, or, typically, partially or fully revealing.

Suggested Citation

  • Lionel De Boisdeffre, 2016. "Characterizing Revealing and Arbitrage-Free Financial Markets," Working Papers hal-02938862, HAL.
    • Handle: RePEc:hal:wpaper:hal-02938862
    Note: View the original document on HAL open archive server: https://univ-pau.hal.science/hal-02938862
    as

    Download full text from publisher

    File URL: https://univ-pau.hal.science/hal-02938862/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-678, May.
    2. Radner, Roy, 1972. "Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets," Econometrica, Econometric Society, vol. 40(2), pages 289-303, March.
    3. Cornet, Bernard & De Boisdeffre, Lionel, 2002. "Arbitrage and price revelation with asymmetric information and incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 38(4), pages 393-410, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lionel de Boisdeffre, 2018. "Sequential equilibrium without rational expectations of prices: A theorem of full existence," Post-Print halshs-01593567, HAL.
    2. Lionel de Boisdeffre, 2013. "Price revelation and existence of equilibrium in a private belief economy," Post-Print halshs-01053471, HAL.
    3. Lionel de Boisdeffre, 2021. "Dropping the Cass Trick and Extending Cass' Theorem to Asymmetric Information and Restricted Participation," Post-Print halshs-03196923, HAL.
    4. Lionel de Boisdeffre, 2012. "On the existence of financial equilibrium when beliefs are private," Post-Print halshs-00746975, HAL.
    5. Lionel DE BOISDEFFRE, 2015. "Learning from arbitrage," Working Papers 2015-2016_2, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Sep 2015.
    6. de Boisdeffre, Lionel, 2022. "Dropping rational expectations," Mathematical Social Sciences, Elsevier, vol. 115(C), pages 37-46.
    7. Lionel de Boisde¤re, 2021. "Equilibrium in incomplete markets with differential information: A basic model of generic existence," Post-Print halshs-03196857, HAL.
    8. Lionel De Boisdeffre, 2015. "Price revelation and existence of financial equilibrium with incomplete markets and private beliefs," Working papers of CATT hal-02943034, HAL.
    9. Lionel De Boisdeffre, 2019. "Dropping the Cass Trick and Extending Cass' Theorem to Asymmetric Information," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-02180836, HAL.
    10. Lionel de Boisdeffre, 2017. "Sequential equilibrium without rational expectations of prices: A theorem of full existence," Documents de travail du Centre d'Economie de la Sorbonne 17036, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    11. Lionel De Boisdeffre, 2018. "Equilibrium with Differential Information and Exogenous Beliefs: A Basic Model of Full Existence," Working papers of CATT hal-02141059, HAL.
    12. Lionel de Boisdeffre, 2013. "Price revelation and existence of equilibrium in a private belief economy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01053471, HAL.
    13. Lionel De Boisdeffre, 2018. "Circumventing the Hart Puzzle," Post-Print halshs-01903586, HAL.
    14. Lionel De Boisdeffre, 2018. "Equilibrium in Incomplete Markets with Differential Information: A Basic Model of Generic Existence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-02141055, HAL.
    15. Lionel DE BOISDEFFRE, 2017. "Financial Equilibrium with differential Information: a Theorem of generic Existence," Working Papers 2016-2017_12, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2017.
    16. Lionel de Boisdeffre, 2017. "Financial equilibrium with differential information: An existence theorem," Post-Print halshs-01599385, HAL.
    17. Lionel De Boisdeffre, 2019. "Refinements to the generic existence of equilibrium in incomplete markets," Post-Print halshs-02181033, HAL.
    18. Lionel de Boisdeffre, 2018. "Sequential equilibrium without rational expectations of prices: A theorem of full existence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01593567, HAL.
    19. Lionel DE BOISDEFFRE, 2015. "Price Revelation and Existence of Financial Equilibrium with Incomplete Markets and Private Beliefs," Working Papers 2014-2015_7, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Mar 2015.
    20. Lionel de Boisdeffre, 2015. "Price revelation and existence of financial equilibrium with incomplete markets and private beliefs," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01164142, HAL.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-02938862. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.