Kardaras, Constantinos; Kreher, Dörte; Nikeghbali, Ashkan (2015). Strict local martingales and bubbles. Annals of Applied Probability, 25(4):1827-1867.
This paper deals with asset price bubbles modeled by strict local martingales. With any strict local martingale, one can associate a new measure, which is studied in detail in the first part of the paper. In the second part, we determine the “default term” apparent in risk-neutral option prices if the underlying stock exhibits a bubble modeled by a strict local martingale. Results for certain path dependent options and last passage time formulas are given.
This paper deals with asset price bubbles modeled by strict local martingales. With any strict local martingale, one can associate a new measure, which is studied in detail in the first part of the paper. In the second part, we determine the “default term” apparent in risk-neutral option prices if the underlying stock exhibits a bubble modeled by a strict local martingale. Results for certain path dependent options and last passage time formulas are given.
| Item Type: | Journal Article, refereed, original work |
|---|---|
| Communities & Collections: | 07 Faculty of Science > Institute of Mathematics |
| Dewey Decimal Classification: | 510 Mathematics |
| Scopus Subject Areas: | Physical Sciences > Statistics and Probability
Social Sciences & Humanities > Statistics, Probability and Uncertainty |
| Language: | English |
| Date: | 21 May 2015 |
| Deposited On: | 14 Jan 2016 11:03 |
| Last Modified: | 26 Jan 2022 06:18 |
| Publisher: | Institute of Mathematical Statistics |
| ISSN: | 1050-5164 |
| OA Status: | Closed |
| Free access at: | Publisher DOI. An embargo period may apply. |
| Publisher DOI: | https://doi.org/10.1214/14-AAP1037 |
| Related URLs: | http://projecteuclid.org/euclid.aoap/1432212431 (Organisation) |
Kardaras, Constantinos