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Financial and Thermodynamic Equilibrium
Author(s) -
Roma Antonio
Publication year - 2000
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/1468-0300.00036
Subject(s) - arbitrage , production (economics) , economics , asset (computer security) , mathematical economics , thermodynamic equilibrium , thermodynamic process , general equilibrium theory , process (computing) , microeconomics , computer science , financial economics , thermodynamics , physics , material properties , computer security , operating system
This paper explores general equilibrium asset pricing implications in a two‐period model in which the production side explicitly describes the thermodynamic process unavoidably connected with production. We show that steady state of the production process, i.e. thermodynamic equilibrium, has a one‐to‐one correspondence with the absence of arbitrage possibilities. This provides an alternative definition of the absence of arbitrage. (J.E.L.: D5, G1, R3)