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Collective fineness of stock prices and efficiency of financial markets
Authors:Kose John
Institution:New York University, New York, NY 10003, USA
Abstract:Recent literature exploring the efficiency properties of options has examined the conditions under which incomplete financial markets would be equivalent to the Arrow-Debreu model. A usual assumption made in establishing such an equivalence is that some security price is ‘fine’ on the state space. This assumption is relaxed. Under more realistic assumptions it is shown that any portfolio is fine and options written on it can bring about complete markets.
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