An Arrow security is an instrument with a fixed payout of one unit in a specified state and no payout in other states.
[Lengwiler, Yvan. Microfoundations of financial economics: an introduction to general equilibrium asset pricing. Princeton University Press, 2009. p. 41.] It is a type of hypothetical asset used in the Arrow market structure model. In contrast to the
Arrow-Debreu market structure model, an Arrow market is a market in which the individual agents engage in trading
asset
In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value ...
s at every time period t. In an Arrow-Debreu model, trading occurs only once at the beginning of time. An Arrow Security is an asset traded in an Arrow market structure model which encompasses a complete market.
Arrow Security is also called
State Contingent Claim,
Supershare Option.
See also
*
Arrow-Debreu security
References
Finance theories
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