Abstract

We show that the equilibrium of the arbitraged economy is asymptotically Walrasian in the sense that it converges to the equilibrium of an appropriately defined competitive economy with no arbitrageurs. The equilibrium of this competitive economy, called Walrasian equilibrium with restricted consumption, is related to – though not identical to – the well-known Walrasian equilibrium with restricted participation. This characterization serves to clarify the role that arbitrageurs play in integrating markets.

Authors

Rohit Rahi, Jean-Pierre Zigrand

Year

2014

Journal

Mathematics and Financial Economics, (8)3, 249–264.

Keywords

Computational Finance and Financial markets

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