Financial innovations and arbitrage pricing in economies with frictions: revisited

Article Abstract:

The effectiveness of the arbitrage pricing approach and the design and pricing of innovated securities in economies with limits on short sales is considered. A definition of non-arbitrage-conditions that is suitable for economies is also arrived at in the process. It is shown that the arbitrage pricing approach has an indeterminate effectiveness in markets with short sales restrictions. When short sales restrictions are the only friction in the market, innovators will release securities that the investors cannot replicate.

Securities Dealers, Investment Banking and Securities Dealing, Security brokers and dealers, Econometrics & Model Building, Econometrics, Markets (Economics), Arbitrage, Business models

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The comparative statics of changes in risk revisited

Article Abstract:

The situation obtained under conditions characterized by changing risk is discussed and applied to a linear model. In particular, the determinants of risk change that raise the value of the decision variable for risk-averse entities is determined. Such comparative statics of changes in risk results in the attainment of a result that is characterized by a greater central riskiness dominance that proves to be on par with stochastic dominance of the second degree.

Decision-making, Models, Decision making, Risk (Economics)

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Nonconvex production economies

Article Abstract:

A production economy that features consumer distribution problems and nonconvex consumption sets is examined. The set of economies with equilibrium under such conditions exhibited density in the set of all economies given specific market topology. However, such a set will not be open since an economy with equilibrium conditions can be developed and simultaneously function as the limit of economies in disequilibrium.

Industrial productivity, Production (Economics)

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