Elimination of arbitrage states in asymetric information models

Bernard Cornet (1, 2, 3) , Lionel De Boisdeffre (2)

1 KU - University of Kansas [Lawrence]
2 CES - Centre d'économie de la Sorbonne
3 PSE - Paris School of Economics

In a financial economy with asymmetric information and incomplete markets, we study how agents, having no model of how equilibrium prices are determined, may still refine their information by eliminating sequentially "arbitrage state(s)", namely, the state(s) which would grant the agent an arbitrage, if realizable.

Mots clés: Information revealed by prices; Asymmetric information; Incomplete markets; Arbitrage

Domaines: Economies et finances

Bernard Cornet, Lionel De Boisdeffre. Elimination of arbitrage states in asymetric information models. Economic Theory, 2009, 38 (2), pp.287-293. ⟨10.1007/s00199-007-0205-z⟩. ⟨hal-01871267⟩