Bubbles and crashes in a Black–Scholes model with delay
نویسندگان
چکیده
منابع مشابه
Bubbles and crashes in a Black-Scholes model with delay
This paper studies the asymptotic behaviour of an affine stochastic functional differential equation modelling the evolution of the cumulative return of a risky security. In the model, the traders of the security determine their investment strategy by comparing short– and long–run moving averages of the security’s returns. We show that the cumulative returns either obey the Law of the Iterated ...
متن کاملBubbles and Market Crashes
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset prices away from their fundamental value. This growth makes the system increasingly susceptible to any exogenous shock, thus eventually precipitating a crash...
متن کاملBubbles and Crashes
These notes consider Abreu and Brunnermeier’s (2003) paper on the failure of rational arbitrage in asset markets. Recall that the “no-trade” theorem states that speculative bubbles cannot exist in a world with only rational traders even if there is asymmetric information, so long as these traders share a common prior. Believers in the efficient market hypothesis argue that even if there are als...
متن کاملBubbles, Crashes and Risk
In an asset-pricing model, risk-averse agents need to forecast the conditional variance of a stock’s return. A near-rational restricted perceptions equilibrium exists in which agents believe prices follow a random walk with a conditional variance that is self-fulfilling. When agents estimate risk in real-time, recurrent bubbles and crashes can arise. These effect are stronger when agents allow ...
متن کاملMarket Bubbles and Crashes
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes and effects. This review and essay evaluates some of the hypotheses offered to explain the market crashes that often follow asset price bubbles. Starting fr...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Finance and Stochastics
سال: 2012
ISSN: 0949-2984,1432-1122
DOI: 10.1007/s00780-012-0181-4