31 Pages Posted: 13 Jun 2001
Date Written: April 27, 2001
In this paper we propose a model of asset prices consistent with the no-arbitrage principle but allowing for the existence of "bubbles" which are explicitely characterized. From a mathematical point of view the main theorem may be read as a measure-theoretic interpretation of local martingales.
Keywords: Martingales, arbitrage, finitely additive measures, bubbles, fundamental theorem of asset pricing.
JEL Classification: G12, C18I
Suggested Citation: Suggested Citation