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Arbitrage and asset market equilibrium in infinite dimensional economies with short-selling and risk-averse expected utilities

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Abstract
We consider a model with an infinite number of states of nature, von Neumann - Morgenstern utilities, where agents have different probability beliefs and where short sells are allowed. We show that no-arbitrage conditions, defined for finite dimensional asset markets models, are not sufficient to ensure existence of equilibrium in presence of an infinite number of states of nature. However, if the individually rational utility set U is compact, we obtain an equilibrium. We give conditions which imply the compactness of U. We give examples of non-existence of equilibrium when these conditions do not hold

Suggested Citation

  • Thai Ha-Huy & Cuong Le Van & Nguyen Manh-Hung, 2016. "Arbitrage and asset market equilibrium in infinite dimensional economies with short-selling and risk-averse expected utilities," Documents de travail du Centre d'Economie de la Sorbonne 16062, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    • Handle: RePEc:mse:cesdoc:16062
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    References listed on IDEAS

    as
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    Cited by:

    1. Ha-Huy, Thai & Le Van, Cuong, 2017. "Existence of equilibrium on asset markets with a countably infinite number of states," Journal of Mathematical Economics, Elsevier, vol. 73(C), pages 44-53.
    2. Thai Ha-Huy & Cuong Le Van, 2012. "Asset market equilibrium with short-selling and a continuum of number of states of nature," Working Papers hal-04132780, HAL.

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    More about this item

    Keywords

    asset market equilibrium; individually rational attainable allocations; individually rational utility set; no-arbitrage prices; no-arbitrage condition;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G1 - Financial Economics - - General Financial Markets

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