A pure security or primitive security or Arrow-Debreu security is a security that pays 1 currency unit at the end of the period if one particular state of nature is realized and pays nothing if any other state is realized. Market securities can be thought of as portfolios of pure securities, which is a useful abstraction facilitating analysis in many economic contexts.
The concept of the pure securities allows the logical decomposition of the market securities into portfolios of pure securities. Thus every market security may be considered a combination of various pure securities.
Famous quotes containing the words pure and/or security:
“So must pure lovers’ souls descend
T’affections, and to faculties,
Which sense may reach and apprehend,
Else a great Prince in prison lies.”
—John Donne (c. 1572–1631)
“A well-regulated militia being necessary to the security of a free State, the right of the people to keep and bear arms shall not be infringed.”
—Second Amendment, U.S. Constitution (1791)