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Existence of financial equilibrium with differential information: the no-arbitrage characterization

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  • Lionel De Boisdeffre

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

Abstract

In Cornet-De Boisde¤re (J Math Econ 38: 393-410, 2002), we had extended the classical equilibrium and arbitrage concepts of symmetric information to an asymmetric information model dropping Radner's (Econometrica 47: 655-678, 1979) rational expectations' assumption. In Cornet-De Boisdeffre (Econ Theory 38: 287-293, 2009), we showed how agents could infer enough information, in this model, to preclude arbitrage from financial markets. In De Boisdeffre (Econ Theory 31: 255-269, 2007), we extended to that model Cass' (CARESS WP 84-09, 1984) classical existence theorem for nominal assets, by showing the existence of equilibrium was characterized by a general no-arbitrage condition. We now display the same characteristic property for numeraire assets and, thus, extend Geanakoplos-Polemarchakis' (Essays in Honnor of K.J. Arrow, Starr & Starrett ed., Cambridge UP Vol. 3, 65-96, 1986) classical theorem to the asymmetric information setting. Contrasting withRadner's, these results show that symmetric and asymmetric information economies can be embedded into a common model, where they share similar properties.

Suggested Citation

  • Lionel De Boisdeffre, 2015. "Existence of financial equilibrium with differential information: the no-arbitrage characterization," Working papers of CATT hal-02945462, HAL.
    • Handle: RePEc:hal:wpcatt:hal-02945462
    Note: View the original document on HAL open archive server: https://hal-univ-pau.archives-ouvertes.fr/hal-02945462
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    References listed on IDEAS

    as
    1. Bernard Cornet & Lionel Boisdeffre, 2009. "Elimination of arbitrage states in asymmetric information models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(2), pages 287-293, February.
    2. Gale, D. & Mas-Colell, A., 1975. "An equilibrium existence theorem for a general model without ordered preferences," Journal of Mathematical Economics, Elsevier, vol. 2(1), pages 9-15, March.
    3. Bernard Cornet & Lionel Boisdeffre, 2009. "Elimination of arbitrage states in asymmetric information models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(2), pages 287-293, February.
    4. Bernard Cornet & Lionel Boisdeffre, 2009. "Elimination of arbitrage states in asymmetric information models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(2), pages 287-293, February.
    5. Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-678, May.
    6. Gale, D. & Mas-Colell, A., 1979. "Corrections to an equilibrium existence theorem for a general model without ordered preferences," Journal of Mathematical Economics, Elsevier, vol. 6(3), pages 297-298, December.
    7. Cornet, Bernard & De Boisdeffre, Lionel, 2002. "Arbitrage and price revelation with asymmetric information and incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 38(4), pages 393-410, December.
    Full references (including those not matched with items on IDEAS)

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