The Martingale Theory of Bubbles: Implications for the Valuation of Derivatives and Detecting Bubbles
Robert A. Jarrow
Cornell University - Samuel Curtis Johnson Graduate School of Management
May 10, 2010
Johnson School Research Paper Series No. 25-2010
The martingale theory of bubbles studies the existence and characterization of asset price bubbles in continuous time and continuous trading economies under both the no arbitrage (no free lunch vanishing risk) and no dominance hypotheses. We review this theory, with an emphasis on understanding its implications for the valuation of derivatives and detecting asset price bubbles.
Number of Pages in PDF File: 19working papers series
Date posted: May 10, 2010
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