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...

This paper extends and refines the Jarrow et al. (2006, 2008) arbitrage free pricing theory for bubbles to characterize forward and futures prices. Some new insights are obtained in this regard. In particular, we: (i) provide a canonical process for asset price bubbles suitable for empirical...

This paper provides a new explanation for closed-end fund (CEF) discounts and premiums using the local martingale theory of asset price bubbles. This is a rational asset pricing model that is shown to be consistent with the existing empirical evidence on CEF discounts/premiums. Additional...