A note on two notions of arbitrage
Allouch, Nizar (2001) A note on two notions of arbitrage. Working Paper. University of Warwick, Department of Economics, Coventry.
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Since Hart's  and Werner's  seminal papers, several conditions have been proposed to show the existence of equilibrium in an asset exchange economy with short-selling. In this note, we discuss the relationship between two no-arbitrage conditions. The first condition is the assumption that the individually rational utility set U is compact, as considered by Dana, Le Van and Magnien . The second is inconsequential arbitrage, introduced by Page, Wooders and Monteiro . The main result of this comparison is to show that the inconsequential arbitrage condition is stronger than the assumption that U is compact.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Assets (Accounting), Arbitrage, Securities, Short selling|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Number of Pages:||8|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|References:|| R.-A. Dana, C. Le Van and F. Magnien, On the different notions of arbitrage and existence of equilibrium, Journal of Economic Theory 86 (1999), 169-193.  J.M. Grandmont, Temporary general equilibrium theory, Econometrica 45 (1977), 535-572.  J.R. Green, Temporary general equilibrium in a sequential trading model, Econometrica 41(1973), 1103-1123.  P.J. Hammond, Overlapping expectations and Hart's condition for equilibrium in a securities model, Journal of Economics Theory 31 (1983), 170-175.  O. Hart, On the existence of an equilibrium in a securities model, Journal of Economic Theory 9(1974), 293-311.  F. Milne, Short selling, default risk and the existence of equilibrium in a securities model, International Economic Review, 21 (1980), 255-267.  L.T. Nielsen, Asset market equilibrium with short selling, Review of Economic Studies 56 (1989), 467-474.  F.H. Page, Jr, On equilibrium in Hart's securities exchange model, Journal of Economic Theory 41(1987), 392-404.  F.H. Page, Jr, M.H. Wooders and P.K. Monteiro, Inconsequential arbitrage, Journal of Mathematical Economics 34 (2000), 439-469.  J. Werner, Arbitrage and the existence of competitive equilibrium, Econometrica 55 (1987), 1403-1418.|
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