Analysis of absence of arbitrage normally ignores payoffs in states to which the agent assigns zero probability. We extend the Fundamental Theorem of Asset Pricing to the case of quot;no empty promisesquot; in which the agent cannot promise arbitrarily large payments in some states. There is a...

Analysis of absence of arbitrage normally ignores payoffs in a set of states to which the agent assigns zero probability. However, bankruptcy and limited resources make it impossible for a trader to make large promises in a state the trader believes to be impossible if the market considers that...

We analyze competition among informed traders in the continuous-time Kyle (1985) model, as Foster and Viswanathan (1996) do in discrete time. We confirm the conjecture of Holden and Subrahmanyam (1992) that there is no linear equilibrium when traders have identical information. When traders'...