Arrow prices revolutionize finance, creating optimal allocations and competitive equilibrium.
The Contingent Claims Model builds on a well-known economic theory to include uncertainty in future outcomes. This model helps us understand how financial markets work and how to make optimal decisions in uncertain situations. By extending the theory to include futures markets and financial securities, researchers have shown that competitive markets can lead to the best outcomes for everyone involved. This research has paved the way for further exploration in the field of finance.