An Arrow-Debreu security is a theoretical financial instrument that pays exactly 1 unit of currency in one specific state of the world and 0 in all other states. The state price vector is the collection of the current prices of all such Arrow-Debreu securities for the finite set of states in the market model.
Conditions: The market model has a finite set of states.; Payoffs are normalized to 1 in one state and 0 elsewhere.; The model is a one-period setting.
An Arrow-Debreu security is a theoretical financial instrument that pays exactly 1 unit of currency in one specific state of the world and 0 in all other states. The state price vector is the collection of the current prices of all such Arrow-Debreu securities for the finite set of states in the market model.
Conditions: The market model has a finite set of states.; Payoffs are normalized to 1 in one state and 0 elsewhere.; The model is a one-period setting.