Document Type
Discussion Paper
Publication Date
2-1-1988
CFDP Number
860
CFDP Pages
20
Abstract
A restriction to nonnegative wealth is sufficient to preclude all arbitrage opportunities in financial models that have risk neutral probabilities that are valid for all simple strategies. Imposing nonnegative wealth does not constrain agents from making the choice they would make under the standard integrability condition. This conclusion does not depend on whether the markets are complete.
Recommended Citation
Dybvig, Philip H. and Huang, Chi-fu, "Nonnegative Wealth, Absence of Arbitrage, and Feasible Consumption Plans" (1988). Cowles Foundation Discussion Papers. 1103.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1103