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Pricing of New Assets in an Infinite‐Horizon Frictional Economy
Author(s) -
Yu Dahai
Publication year - 1999
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.00080
Subject(s) - economics , valuation (finance) , arbitrage , financial economics , microeconomics , economy , finance
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.