No-arbitrage equilibria with differential information : an enlarged existence theorem
On the example of a pure-exchange financial economy with two periods, incomplete nominal-asset markets and differential information of the adverse selection's type, Cornet-De Boisdeffre (2002) introduced refined concepts of no-arbitrage prices and equilibria, which extended to the asymmetric information setting the classical concepts of the symmetric information literature. We now extend to the asymmetric information setting a standard existence property of symmetric information models. Namely, we prove that no-arbitrage prices fully characterize equilibrium security prices, in the sense that each equilibrium security price is arbitrage-free and each no-arbitrage price can be embedded as a no-arbitrage equilibrium security price. This result holds under the same standard conditions whether agents have symmetric or asymmetric information.
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- Monique Florenzano, 2008.
Documents de travail du Centre d'Economie de la Sorbonne
b08005, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Monique Florenzano, 2007. "General equilibrium," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00250167, HAL.
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