Multiperiod Securities Markets, With Differential Information

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Excerpt from Multiperiod Securities Markets, With Differential Information: Martingales and Resolution Times We model multiperiod securities markets with differential information. A price system that admits no free lunches is related to martingales when agents have rational expectations. We introduce a concept called resolution time and show that a better informed agent and a worse informed agent must agree on the resolution times of commonly marketed events if they have rational expectations and if there are no free lunches. It then follows that if all the elementary events are marketed for a worse informed agent then any price system that admits no free lunches to a better informed agent must dynamically equalize the information asymmetry between the two. We provide an example of a dynamically fully revealing price system that is arbitrage free and yields elementarily complete markets. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully, any imperfections that remain are intentionally left to preserve the state of such historical works.