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A Liquidity Based Model for Asset Price Bubbles

Protter, Philip - 2011

We provide a new liquidity based model for financial asset price bubbles that explains bubble formation and bubble bursting. The martingale approach (Cox and Hobson (2005), Jarrow et al. (2007)) to modeling price bubbles assumes that the asset's market price process is exogenous and the...

Persistent link: https://www.econbiz.de/10013133862

An Equilibrium Capital Asset Pricing Model in Markets with Price Jumps and Price Bubbles

Jarrow, Robert A. - 2017

This paper derives an equilibrium capital asset pricing model (CAPM) in a market where asset prices can exhibit price jumps and price bubbles. We derive a generalized intertertemporal CAPM and consumption CAPM for these markets. The derived risk return relation differs from the classical results...

Persistent link: https://www.econbiz.de/10012954630

A Rational Asset Pricing Model for Premiums and Discounts on Closed-End Funds : The Bubble Theory

Jarrow, Robert A. - 2017

theory of asset price bubbles. This is a rational asset pricing model that is shown to be consistent with the existing … research for their resolution. This bubble theory also applies equally well to understanding discounts and premiums on exchange …

Persistent link: https://www.econbiz.de/10012960808

Testing for Asset Price Bubbles : An Invariance Theorem

Jarrow, Robert A. - 2019

This paper provides an invariance theorem that facilitates testing for the existence of an asset price bubble in a market where the price evolves as a Markov diffusion process. The test involves only the properties of the price process' quadratic variation under the statistical probability. It...

Persistent link: https://www.econbiz.de/10012891135

Asset Price Bubbles, Market Liquidity and Systemic Risk

Jarrow, Robert A. - 2019

This paper studies an equilibrium model with heterogeneous agents, asset price bubbles, and trading constraints. Market liquidity is modeled as a stochastic quantity impact from trading on the price. Bubbles are larger in liquid markets and when trading constraints are more binding. Systemic...

Persistent link: https://www.econbiz.de/10012899970

Risk Measures and the Impact of Asset Price Bubbles

Jarrow, Robert A. - 2016

This paper analyzes the impact of asset price bubbles on a firm's standard risk measures, including value-at-risk (VaR) and conditional value-at-risk (CVaR). Comparing a bubble and non-bubble economy, it is shown that asset price bubbles cause (i) a firm's VaR and CVaR to decline, but (ii)...

Persistent link: https://www.econbiz.de/10013007080

A study on asset price bubble dynamics : explosive trend or quadratic variation?

Jarrow, Robert A.; Kwok, Simon Sai Man - In: Quantitative finance 24 (2024) 5, pp. 613-626

Persistent link: https://www.econbiz.de/10014552111

Asset Price Bubbles in Incomplete Markets

Jarrow, Robert A.; Protter, Philip; Shimbo, Kazuhiro - 2007

theory for bubble birth which involves a nontrivial modification of the classical martingale pricing framework. This … within the classical theory. Finally, we investigate the pricing of derivative securities in the presence of asset price … in contrast to those of the classical theory. We propose, but do not implement, some new tests for the existence of asset …

Persistent link: https://www.econbiz.de/10014223725

Applying the local martingale theory of bubbles to cryptocurrencies

Choi, Soon Hyeok; Jarrow, Robert A. - In: International journal of theoretical and applied … 25 (2022) 3, pp. 1-25

Persistent link: https://www.econbiz.de/10013371053

Variance and Volatility Swaps : Bubbles and Fundamental Prices

Jarrow, Robert A. - 2010

The martingale theory of price bubbles defines an asset bubble to exist when the asset's price process is a strict …

Persistent link: https://www.econbiz.de/10013141918