Annals of Finance

, Volume 6, Issue 2, pp 241–254

Behavioral arbitrage with collateral and uncertain deliveries

Research Article

DOI: 10.1007/s10436-009-0135-9

Cite this article as:
Fajardo, J. Ann Finance (2010) 6: 241. doi:10.1007/s10436-009-0135-9


In this paper we study the implications of the absence of Behavioral arbitrage opportunities (BAO) in a two period incomplete markets economy where default is allowed but there are collateral requirements and utility penalties due to uncertainty on deliveries. We obtain a modified version of the Fundamental Theorem of asset pricing with default when deliveries are defined in terms of units of account, as in Dubey et al. (1995), and when deliveries are defined as bundles of goods, as in Dubey et al. (2005). Also, we establish that independent of the way that we define deliveries, absence of BAO is compatible with the existence of equilibrium.


Collateral Utility penalties Behavioral arbitrage Uncertain deliveries 

JEL Classification

D52 G11 G12 

Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.IBMEC Business SchoolRio de JaneiroBrazil

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