In financial economics, a state-price security, also called an Arrow-Debreu security (from its origins in the Arrow-Debreu model), is a contract that agrees to pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a particular time in the future and pay zero numeraire in all other states. The price of this security is the state price of this particular state of the world, which may be represented by a vector.

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  • In financial economics, a state-price security, also called an Arrow-Debreu security (from its origins in the Arrow-Debreu model), is a contract that agrees to pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a particular time in the future and pay zero numeraire in all other states. The price of this security is the state price of this particular state of the world, which may be represented by a vector. The state price vector is the vector of state prices for all states. As such, any derivatives contract whose settlement value is a function of an underlying whose value is uncertain at contract date can be decomposed as a linear combination of its Arrow-Debreau securities, and thus as a weighed sum of its state prices. The Arrow-Debreu model (also referred to as the Arrow-Debreu-McKenzie model or ADM model) is the central model in the General Equilibrium Theory and uses state prices in the process of proving the existence of a unique general equilibrium.
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  • In financial economics, a state-price security, also called an Arrow-Debreu security (from its origins in the Arrow-Debreu model), is a contract that agrees to pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a particular time in the future and pay zero numeraire in all other states. The price of this security is the state price of this particular state of the world, which may be represented by a vector.
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  • State prices
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