Pricing of New Assets in an Infinite-Horizon Frictional Economy |
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Authors: | Dahai Yu |
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Institution: | Tufts University, USA |
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Abstract: | This paper studies the pricing of new assets in an infinite-horizon frictional economy. It uses results on state prices to establish conditions under which the valuation structure of the economy (defined as the collection of all state price processes) is unaffected by the introduction of new assets and conditions under which the new assets do not give rise to arbitrage. |
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