Equilibrium and Arbitrage in Incomplete Asset Markets with Fixed Prices

P.J.J. Herings, H.M. Polemarchakis

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Abstract

At arbitrary prices of commodities and assets, fix-price equilibria exist under weak assumptions: endowments need not satisfy an interiority condition, utility functions need only satisfy a very weak monotonicity requirement, and the asset return matrix allows for redundant assets. Prices of assets may permit arbitrage. At equilibrium, though restricted through endogenously determined trading constraints, arbitrage possibilities may persists in an example, an individual holds an arbitrage portfolio.
Original languageEnglish
Pages (from-to)133-155
JournalJournal of Mathematical Economics
Volume37
DOIs
Publication statusPublished - 1 Jan 2002

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