Arbitrage in General Equilibrium英文文献资料.docVIP

Modern Economy, 2012, 3, 396-401 /10.4236/me.2012.34051 Published Online July 2012 (http://www.SciRP.org/journal/me) Arbitrage in General Equilibrium Oscar Varela * Department of Economics and Finance, University of Texas at El Paso, El Paso, USA Email: ovarela3@ Received May 9, 2012; revised May 18, 2012; accepted June 25, 2012 ABSTRACT Normal trade in goods assumes two sectors that co-exist for reasons such as comparative advantage and interact via trade. Arbitrage trade in goods assumes two markets that artificially exist and converge via trade. Restoration of the law of one price via arbitrage creates one sector out of two, and in general equilibrium, equalizes opportunity cost of re- sources used in production. Arbitrage does not occur in a vacuum, such that when the high (low) price of a good de- creases (increases) in its artificially segmented market during arbitrage, the supply of the good falls (rises), the re- sources used intensively in that good earn lower (higher) returns, affecting security prices, and the supply of those re- sources in that good’s production fall (rise). Keywords: General Equilibrium; Arbitrage 1. Introduction examines the relationship between the efficient market hypotheses and general equilibrium, where economic inefficiency leads to market inefficiency as it reduces the information necessary for efficient prices. Arbitrage, possible when a good has different prices in multiple markets, can restore the “law of one price”. In contrast to normal trade, with markets that co-exist for reasons like comparative advantage and interact via trade, arbitrage leads to convergence via trade of markets that artificially exist. Restoration of the law of one price via arbitrage creates one sector out of two, and in general equilibrium, equalizes opportunity cost of resources used in production. How arbitrage in goods interacts with se- curities (and more bro