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Elimination of arbitrage states in asymetric information models

Bernard Cornet 1, 2, 3 Lionel Boisdeffre 2
1 KU - University of Kansas [Lawrence]
2 CES - Centre d'économie de la Sorbonne
3 PSE - Paris School of Economics
Abstract : 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.
Keywords : Asymmetric information Information revealed by prices Incomplete markets Arbitrage
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Bernard Cornet, Lionel Boisdeffre. Elimination of arbitrage states in asymetric information models. Economic Theory, Springer Verlag, 2009, 38 (2), pp.287-293. ⟨10.1007/s00199-007-0205-z⟩. ⟨hal-01871267⟩

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