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Uncertainty and absence of arbitrage opportunity

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  • Yaroslav Ivanenko
  • Illya Pasichnichenko

Abstract

It is shown that absence of arbitrage opportunity in financial markets is a particular case of existence of uncertainty in decision system. Absence of arbitrage opportunity is considered in the sense of the Arrow-Debreu model of financial market with a riskless asset, while uncertainty (or ambiguity) is defined on the basis of the principle of internal coherence of M. Allais.

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  • Yaroslav Ivanenko & Illya Pasichnichenko, 2013. "Uncertainty and absence of arbitrage opportunity," Papers 1307.5602, arXiv.org.
    • Handle: RePEc:arx:papers:1307.5602
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    References listed on IDEAS

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    1. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    2. Kerry Back, 2010. "Martingale Pricing," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 235-250, December.
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