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Journal Articles Economics Bulletin Year : 2003

## Rate of arbitrage and reconciled beliefs

Marco Scarsini
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Yossi Feinberg
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#### Abstract

Any group of risk neutral agents who hold differing beliefs is vulnerable to money pumps (arbitrage). Thus, the agents may wish to reconcile their beliefs into a new joint belief. We propose a criterion for the choice of reconciled belief based on the notion of rate of arbitrage.'' It is shown that there exists a unique belief (probability distribution) that minimizes the maximal expected rate of arbitrage, and an explicit formula for this belief is given.

### Dates and versions

hal-00539814 , version 1 (25-11-2010)

### Identifiers

• HAL Id : hal-00539814 , version 1

### Cite

Marco Scarsini, Yossi Feinberg. Rate of arbitrage and reconciled beliefs. Economics Bulletin, 2003, Vol. 4, N° 11, pp.1-12. ⟨hal-00539814⟩

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