Nonnegative wealth, absence of arbitrage, and feasible consumption plans |
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| Authors: | Dybvig PH; Huang C-f |
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| Institution: | 1 John M Olin School of Business, Washington University, Campus Box 1133, One Brookings Drive, St. Louis, MO 63130, USA
2 Massachusetts Institute of Technology, Massachusetts, USA |
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| Abstract: | A restriction to nonnegative wealth is sufficient to precludeall arbitrage opportunities in financial models that have noarbitrage in limits of simple strategies. Imposing nonnegativewealth does not constrain agents from making the choice theywould make under the standard integrability condition. Theseconclusions do not depend on whether markets are complete. |
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