Rate of arbitrage and reconciled beliefs

Marco Scarsini and Yossi Feinberg
Additional contact information
Yossi Feinberg: MEDS, Northwestern University - Northwestern University [Evanston]

Post-Print from HAL

Abstract: Any group of risk neutral agents who hold differing beliefs is vulnerable to money pumps (arbitrage). Thus, the agents may wish to reconcile their beliefs into a new joint belief. We propose a criterion for the choice of reconciled belief based on the notion of ``rate of arbitrage.'' It is shown that there exists a unique belief (probability distribution) that minimizes the maximal expected rate of arbitrage, and an explicit formula for this belief is given.

Keywords: Subjective probability; Dutch book; betting system; zero-sum game; arbitrage; inconsistent beliefs.; inconsistent beliefs (search for similar items in EconPapers)
Date: 2003
References: Add references at CitEc
Citations:

Published in Economics Bulletin, 2003, Vol. 4, N° 11, pp.1-12

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Rate of Arbitrage and Reconciled Beliefs (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00539814

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().