Allouch, Nizar (2001) A note on two notions of arbitrage. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

Since Hart's [5] and Werner's [10] 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 [1]. The second is inconsequential arbitrage, introduced by Page, Wooders and Monteiro [9]. 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
Date:	2001
Number:	No.623
Number of Pages:	8
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
References:	[1] 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. [2] J.M. Grandmont, Temporary general equilibrium theory, Econometrica 45 (1977), 535-572. [3] J.R. Green, Temporary general equilibrium in a sequential trading model, Econometrica 41(1973), 1103-1123. [4] P.J. Hammond, Overlapping expectations and Hart's condition for equilibrium in a securities model, Journal of Economics Theory 31 (1983), 170-175. [5] O. Hart, On the existence of an equilibrium in a securities model, Journal of Economic Theory 9(1974), 293-311. [6] F. Milne, Short selling, default risk and the existence of equilibrium in a securities model, International Economic Review, 21 (1980), 255-267. [7] L.T. Nielsen, Asset market equilibrium with short selling, Review of Economic Studies 56 (1989), 467-474. [8] F.H. Page, Jr, On equilibrium in Hart's securities exchange model, Journal of Economic Theory 41(1987), 392-404. [9] F.H. Page, Jr, M.H. Wooders and P.K. Monteiro, Inconsequential arbitrage, Journal of Mathematical Economics 34 (2000), 439-469. [10] J. Werner, Arbitrage and the existence of competitive equilibrium, Econometrica 55 (1987), 1403-1418.
URI:	http://wrap.warwick.ac.uk/id/eprint/1567

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