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. © World Scientific Publishing Company.
Cassese, G. (2005). A note on asset bubbles in continuous-time. INTERNATIONAL JOURNAL OF THEORETICAL AND APPLIED FINANCE, 8(4), 523-536 [10.1142/S0219024905003074].
A note on asset bubbles in continuous-time
CASSESE, GIANLUCA
2005
Abstract
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. © World Scientific Publishing Company.
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