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:
“The first duty of a lecturer—to hand you after an hour’s discourse a nugget of pure truth to wrap up between the pages of your notebooks and keep on the mantlepiece for ever.”
—Virginia Woolf (1882–1941)
“In the long course of history, having people who understand your thought is much greater security than another submarine.”
—J. William Fulbright (b. 1905)