Principles of financial economics

Cover -- Half-title -- Title -- Copyright -- Contents -- Foreword -- Preface -- Bibliography -- Part One Equilibrium and Arbitrage -- 1 Equilibrium in Security Markets -- 1.1 Introduction -- 1.2 Security Markets -- 1.3 Agents -- 1.4 Consumption and Portfolio Choice -- 1.5 First-Order Conditions -- 1.6 Left and Right Inverses of a Matrix -- 1.7 General Equilibrium -- 1.8 Existence and Uniqueness of Equilibrium -- 1.9 Representative Agent Models -- 1.10 Notes -- Bibliography -- 2 Linear Pricing -- 2.1 Introduction -- 2.2 The Law of One Price -- 2.3 The Payoff Pricing Functional -- 2.4 Linear Equilibrium Pricing -- 2.5 State Prices in Complete Markets -- 2.6 Recasting the Optimization Problem -- 2.7 Notes -- Bibliography -- 3 Arbitrage and Positive Pricing -- 3.1 Introduction -- 3.2 Arbitrage and Strong Arbitrage -- 3.3 Diagrammatic Representation -- 3.4 Positivity of the Payoff Pricing Functional -- 3.5 Positive State Prices -- 3.6 Arbitrage and Optimal Portfolios -- 3.7 Positive Equilibrium Pricing -- 3.8 Notes -- Bibliography -- 4 Portfolio Restrictions -- 4.1 Introduction -- 4.2 Short Sales Restrictions -- 4.3 Portfolio Choice under Short Sales Restrictions -- 4.4 The Law of One Price -- 4.5 Limited and Unlimited Arbitrage -- 4.6 Diagrammatic Representation -- 4.7 Bid-Ask Spreads -- 4.8 Bid-Ask Spreads in Equilibrium -- 4.9 Notes -- Bibliography -- Part Two Valuation -- 5 Valuation -- 5.1 Introduction -- 5.2 The Fundamental Theorem of Finance -- 5.3 Bounds on the Values of Contingent Claims -- 5.4 The Extension -- 5.5 Uniqueness of the Valuation Functional -- 5.6 Notes -- Bibliography -- 6 State Prices and Risk-Neutral Probabilities -- 6.1 Introduction -- 6.2 State Prices -- 6.3 Farkas-Stiemke Lemma -- 6.4 Diagrammatic Representation -- 6.5 State Prices and Value Bounds -- 6.6 Risk-Free Payoffs -- 6.7 Risk-Neutral Probabilities -- 6.8 Notes.