Arbitrage Opportunities in Financial Markets are not Inconsistent with Competitive Equilibrium

Lawrence M. Benveniste and Juan Ketterer

Chapter 4 in Equilibrium and Dynamics, 1992, pp 45-54 from Palgrave Macmillan

Abstract: Abstract Cass’s (1984) pioneering proof of the existence of competitive equilibrium for economies where financial markets are incomplete and securities’ returns are nominally denoted rests crucially on an information structure that assures the absence of risk free arbitrage in equilibrium. Subsequent existence proofs given by Werner (1985) and Duffle (1987) have also leaned heavily on the assumption that equilibrium will be absent of arbitrage opportunities.

Keywords: Equilibrium Price; Competitive Equilibrium; Spot Market; Arbitrage Opportunity; Shadow Prex (search for similar items in EconPapers)
Date: 1992
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DOI: 10.1007/978-1-349-11696-6_4

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