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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.

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Feedback and efficiency in limit order markets

Challet, Damien

In: Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, no. 15, p. 3831-3836

A consistency criterion for price impact functions in limit order markets is proposed that prohibits chain arbitrage exploitation. Both the bid-ask spread and the feedback of sequential market orders of the same kind onto both sides of the order book are essential to ensure consistency at the smallest time scale. All the stocks investigated in Paris Stock Exchange have consistent price impact...

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