ORCID: https://orcid.org/0000-0001-9801-5259; Mazzon, Andrea and Meyer-Brandis, Thilo
ORCID: https://orcid.org/0000-0002-6374-7983
(2018):
Liquidity Induced Asset Bubbles via Flows of ELMMs.
In: SIAM Journal on Financial Mathematics, Vol. 9, No. 2: pp. 800-834
Abstract
We consider a constructive model for asset price bubbles, where the market price W is endogenously determined by the trading activity on the market and the fundamental price W-F is exogenously given, as in [R. Jarrow, P. Protter, and A. Roch, Quant. Finance, 12 (2012), pp. 1339-1349]. To justify WF from a fundamental point of view, we embed this constructive approach in the martingale theory of bubbles (see [R. Jarrow, P. Protter, and K. Shimbo, Math. Finance, 20 (2010), pp. 145-185] and [F. Biagini, H. Follmer, and S. Nedelcu, Finance Stoch., 18 (2014), pp. 297-326]) by showing the existence of a flow of equivalent martingale measures for W, under which W-F equals the expectation of the discounted future cash flow. As an application, we study bubble formation and evolution in a financial network.
Item Type: | Journal article |
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Faculties: | Mathematics, Computer Science and Statistics > Mathematics > Workgroup Financial Mathematics |
Subjects: | 500 Science > 510 Mathematics |
ISSN: | 1945-497X |
Language: | English |
Item ID: | 66356 |
Date Deposited: | 19. Jul 2019, 12:19 |
Last Modified: | 12. Sep 2024, 12:32 |