Department of Mathematics

Seminar in mathematical finance: Bubbles

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Organizers Prof. Dr. Martin Schweizer, Christoph Frei
Place HG G 26.5
Time Wednesdays, 13:15-15:00
First Meeting Wednesday, 20.02.2008, 13:15
We welcome registrations before the start of term per e-mail (see contact) and may even hand out some topics on that basis.
Contact Christoph Frei,, HG G 49.2
Working days at ETH: Monday-Thursday
Language Talks can be given either in German or in English.
Prerequisites Solid knowledge in mathematical finance and stochastic processes
Description We study asset price bubbles by using tools from mathematical finance. In economics, a bubble describes the situation when market prices (significantly) differ from fundamental or intrinsic values. Well-known examples are the tulip mania (1634-1637), the dot-com bubble (1995-2001) and the US housing bubble (2003-2007). Although asset price bubble phenomena are frequently analyzed in economics, they have only recently been studied in mathematical finance. Topics treated in this seminar include the coexistence of no-arbitrage and bubbles, a mathematical characterization of bubbles, and relations between strict local martingales and bubbles.
Literature [1] Jarrow, R., Protter, P. and Shimbo, K. (2007). Asset price bubbles in complete markets, in: M. Fu, R. Jarrow, JY. Yen and R. Elliott: Advances in Mathematical Finance, Birkhäuser, Boston. 97-121.
[2] Jarrow, R., Protter, P. and Shimbo, K. (2007). Asset price bubbles in incomplete markets. Preprint. Available at SSRN:
[3] Pal, S. and Protter, P. (2008). Strict local martingales, bubbles and no early exercise. Preprint. Available at arXiv:

Further literature will be used; details will be announced at the first meeting.

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