The Dynamics of Financially Constrained Arbitrage

We thank Philippe Bacchetta, Bruno Biais, Patrick Bolton, Darrell Duffie, Vito Gala, Jennifer Huang, Henri Pages, Anna Pavlova, Matti Suominen, as well as seminar participants in Amsterdam, Bergen, Bordeaux, the Bank of Italy, la Banque de France, BI Oslo, Bocconi University, Boston University, CEMFI Madrid, Columbia, Copenhagen, Dartmouth College, Duke, Durham University, ESC Paris, ESC Toulouse, the HEC-INSEAD-PSE workshop, HEC Lausanne, Helsinki, the ICSTE-Nova seminar in Lisbon, INSEAD, Imperial College, Institut Henri Poincare, LSE, McGill, MIT, Naples, NYU, Paris School of Economics, University of Piraeus, Porto, Queen's University, Stanford, Toulouse, Universite Paris Dauphine, Science Po - Paris, the joint THEMA-ESSEC seminar, Vienna and Wharton for comments. Financial support from the Paul Woolley Centre at the LSE, and a grant from the Fondation Banque de France, are gratefully acknowledged. All errors are ours. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.