This paper derives an equilibrium capital asset pricing model (CAPM) in a market with trading constraints and asset price bubbles. The asset price processes are general semimartingales including Markov jump-diffusion processes as special cases, and the trading constraints considered include...

In models of financial bubbles, the price of a stock is a priori typically unbounded, and this plays a fundamental role in the analysis of finite horizon local martingale bubbles. It would seem that price bubbles do not apply to bounded risky asset prices, such as bond prices. To avoid this...

This paper presents an arbitrage-free valuation model for a credit risky security where credit risk coexists and interacts with an asset price bubble and liquidity risk (or liquidity costs). As an illustration, this model is applied to determine the fair rate for microfinance loans

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...

After the 2007 credit crisis, nancial bubbles have once again emerged as a topic of current concern. An open problem is to determine in real time whether or not a given asset's price process exhibits a bubble. Due to recent progress in the characterization of asset price bubbles using the...

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...

The martingale theory of price bubbles defines an asset bubble to exist when the asset's price process is a strict local martingale, that is, a local martingale that is not a martingale. Using this definition of a price bubble, for continuous semimartingales, we characterize the conditions under...