While financial markets have recently become more complete and international capital flows well liberalized, markets for goods remain segmented. To investigate how financial innovation and more complete security markets may relieve the effects of this segmentation, we examine a series of...

We investigate the role of quot;arbitrageurs,quot; who exploit price discrepancies between redundant securities. Arbitrage opportunities arise endogenously in an economy populated by rational, heterogeneous investors facing investment restrictions. We show that an arbitrageur alleviates these...

While financial markets have recently become more complete and international capital flows well liberalized, markets for goods remain segmented. To investigate how financial innovation and more complete security markets may relieve the effects of this segmentation, we examine a series of...

Price discrepancies, although at odds with mainstream finance, are persistent phenomena in financial markets. These apparent mispricings lead to the presence of arbitrageurs, who aim to exploit the resulting profit opportunities, but whose role remains controversial. This article investigates...

This paper investigates the equilibrium implications of the presence of nonlinearly taxed, redundant securities, and of the resulting tax arbitrage opportunities. Heterogeneity in taxation leads to discrepancies in assets' pre-tax market prices of risk. We show that this mispricing is set so...

This paper develops a general equilibrium, continuous time model where portfolio constraints generate mispricing between redundant securities. Constrained consumption-portfolio optimization techniques are adapted to incorporate redundant, possibly mispriced, securities. We demonstrate the...