Related papers: Asset Price Bubbles: An Option-based Indicator
In this paper we employ deep learning techniques to detect financial asset bubbles by using observed call option prices. The proposed algorithm is widely applicable and model-independent. We test the accuracy of our methodology in numerical…
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…
In this study, we investigate asset price bubbles in a discrete-time, discrete-state market under model uncertainty and short sales prohibitions. Building on a new fundamental theorem of asset pricing and a superhedging duality in this…
We consider implied volatilities in asset pricing models, where the discounted underlying is a strict local martingale under the pricing measure. Our main result gives an asymptotic expansion of the right wing of the implied volatility…
The bubble is a controversial and important issue. Many methods which based on the rational expectation have been proposed to detect the bubble. However, for some developing countries, epically China, the asset markets are so young that for…
We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
We develop a methodology for detecting asset bubbles using a neural network. We rely on the theory of local martingales in continuous-time and use a deep network to estimate the diffusion coefficient of the price process more accurately…
Jumps and market microstructure noise are stylized features of high-frequency financial data. It is well known that they introduce bias in the estimation of volatility (including integrated and spot volatilities) of assets, and many methods…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
It is a market practice to express market-implied volatilities in some parametric form. The most popular parametrizations are based on or inspired by an underlying stochastic model, like the Heston model (SVI method) or the SABR model (SABR…
We construct a data-driven statistical indicator for quantifying the tail risk perceived by the EURGBP option market surrounding Brexit-related events. We show that under lognormal SABR dynamics this tail risk is closely related to the…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
Motivation for this paper is to understand the impact of information on asset price bubbles and perceived arbitrage opportunities. This boils down to study optional projections of $\mathbb{G}$-adapted strict local martingales into a smaller…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
This article provides a self-contained overview of the theory of rational asset price bubbles. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
In this paper, we focus on the estimation of historical volatility of asset prices from high-frequency data. Stochastic volatility models pose a major statistical challenge: since in reality historical volatility is not observable, its…
We introduce a new definition of speculative bubbles in discrete-time models based on the discounted stock price losing mass at some finite drop-down under an equivalent martingale measure. We provide equivalent probabilistic…