Facoltà di scienze economiche

A note on asset bubbles in continuous-time

Cassese, Gianluca

In: International journal of theoretical and applied finance, 2005, vol. 8, no. 4, p. 523-536

In this paper we propose a model of asset prices consistent with the no-arbitrage principle but allowing for the existence of "bubbles". The structure of bubbles is explicitly characterized and we show that, for example, they may be of either sign. Furthermore, we discuss the existence of bubbles under alternative definitions of absence of arbitrage opportunities. Plus

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    Summary
    In this paper we propose a model of asset prices consistent with the no-arbitrage principle but allowing for the existence of "bubbles". The structure of bubbles is explicitly characterized and we show that, for example, they may be of either sign. Furthermore, we discuss the existence of bubbles under alternative definitions of absence of arbitrage opportunities.