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Erio Castagnoli, Fabio Maccheroni and Massimo Marinacci

Mathematical Finance, 2004, vol. 14, issue 3, 481-485

Abstract: We show that, if prices in a market are Choquet expectations, the existence of one frictionless asset may force the whole market to be frictionless. Any risky asset will cause this collapse if prices depend only on the distribution with respect to a given nonatomic probability measure; the frictionless asset has to be fully revealing if such dependence is not assumed. Similar considerations apply to law‐invariant coherent risk measures.

Date: 2004
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Working Paper: Choquet insurance pricing: a caveat (2003) Downloads
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Handle: RePEc:bla:mathfi:v:14:y:2004:i:3:p:481-485