Nonnegative Wealth, Absence of Arbitrage, and Feasible Consumption Plans

A restriction to nonnegative wealth is sufficient to preclude all arbitrage opportunities in financial models that have risk neutral probabilities that are valid for all simple strategies. Imposing nonnegative wealth does not constrain agents from making the choice they would make under the standard integrability condition. This conclusion does not depend on whether the markets are complete.

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Year of publication:	1988-02
Authors:	Dybvig, Philip H. ; Huang, Chi-fu
Institutions:	Cowles Foundation for Research in Economics, Yale University
Subject:	Investments \| free lunch \| arbitrage \| option pricing \| continuous time

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Extent:	application/pdf
Series:	Cowles Foundation Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	Published in Review of Financial Studies (1988), 1: 377-401 The price is None Number 860 20 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005593363