Shifting martingale measures and the birth of a bubble as a submartingale

Biagini, Francesca ; Föllmer, Hans and Nedelcu, Sorin (2014): Shifting martingale measures and the birth of a bubble as a submartingale. In: Finance and Stochastics, Vol. 18, No. 2: pp. 297-326

Abstract

In an incomplete financial market model, we study a flow in the space of equivalent martingale measures and the corresponding shifting perception of the fundamental value of a given asset. This allows us to capture the birth of a perceived bubble and to describe it as an initial submartingale which then turns into a supermartingale before it falls back to its initial value zero.

• Item Type: Journal article
• Faculties: Mathematics, Computer Science and Statistics > Mathematics > Workgroup Financial Mathematics
• Subjects: 500 Science > 510 Mathematics
• ISSN: 0949-2984
• Language: English