Liquidity induced asset bubbles via flows of ELMMs

DOI10.1137/16M1107097zbMATH Open1410.91437arXiv1611.01440OpenAlexW2551892736WikidataQ129630475 ScholiaQ129630475MaRDI QIDQ4579843FDOQ4579843

Authors: Francesca Biagini, Andrea Mazzon, Thilo Meyer-Brandis 

Publication date: 10 August 2018

Published in: SIAM Journal on Financial Mathematics (Search for Journal in Brave)

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 the work of Jarrow, Protter and Roch (2012). To justify $W^F$ from a fundamental point of view, we embed this constructive approach in the martingale theory of bubbles, see Jarrow, Protter and Shimbo (2010) and Biagini, F"ollmer and Nedelcu (2014), 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.

Full work available at URL: https://arxiv.org/abs/1611.01440

Recommendations

• A liquidity-based model for asset price bubbles
• Asset price bubbles in incomplete markets
• Shifting martingale measures and the birth of a bubble as a submartingale
• Asymptotic asset pricing and bubbles
• Financial asset price bubbles under model uncertainty

zbMATH Keywords

bubblesfinancial networksequivalent martingale measuresliquidity-based model

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Martingales with continuous parameter (60G44) Applications of stochastic analysis (to PDEs, etc.) (60H30) Financial applications of other theories (91G80)

Cites Work

• Emergence of Scaling in Random Networks
• The Structure and Function of Complex Networks
• Title not available (Why is that?)
• Collective dynamics of `small-world' networks
• Title not available (Why is that?)
• Bubbles and Crashes
• On the martingale property of certain local martingales
• Convergence of integral functionals of one-dimensional diffusions
• On the martingale property of stochastic exponentials
• Fragility of arbitrage and bubbles in local martingale diffusion models
• Local martingales, bubbles and option prices
• The network origins of aggregate fluctuations
• Asset price bubbles in incomplete markets
• On the Possibility of Speculation under Rational Expectations
• Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations
• Asset price bubbles in complete markets
• Rational equilibrium asset-pricing bubbles in continuous trading models
• Contagion in financial networks
• Shifting martingale measures and the birth of a bubble as a submartingale
• How to detect an asset bubble
• Equilibria in financial markets with heterogeneous agents: a probabilistic perspective
• Title not available (Why is that?)
• An analysis of the supply curve for liquidity risk through book data
• A simple model of global cascades on random networks
• Forward and futures prices with bubbles
• Foreign currency bubbles
• A liquidity-based model for asset price bubbles
• On exponential local martingales associated with strong Markov continuous local martingales
• Asset pricing in large information networks
• Paris-Princeton lectures on mathematical finance 2013
• The Formation of Financial Bubbles in Defaultable Markets
• Sudden trust collapse in networked societies
• Financial asset bubbles in banking networks

Cited In (9)

• Financial asset price bubbles under model uncertainty
• A liquidity-based model for asset price bubbles
• Title not available (Why is that?)
• Liquidity Based Modeling of Asset Price Bubbles via Random Matching
• Shifting martingale measures and the birth of a bubble as a submartingale
• Financial asset bubbles in banking networks
• Detecting asset price bubbles using deep learning
• Bubbly Liquidity
• Asset price bubbles in markets with transaction costs

This page was built for publication: Liquidity induced asset bubbles via flows of ELMMs

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4579843)