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- Title
FORWARD AND FUTURES PRICES WITH BUBBLES.
- Authors
JARROW, ROBERT A.; PROTTER, PHILIP
- Abstract
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 estimation, (ii) discuss new methods to test empirically for asset price bubbles using both spot prices and call/put option prices on the spot commodity, (iii) show that futures prices can have bubbles independent of the underlying asset's price bubble, (iv) relate forward and futures prices under bubbles, and (v) relate price options on futures with asset price bubbles.
- Subjects
PRICING; CANONICAL correlation (Statistics); SPOT prices; PRICES; BESSEL functions; MARTINGALES (Mathematics); INTEREST rates; STOCHASTIC analysis
- Publication
International Journal of Theoretical & Applied Finance, 2009, Vol 12, Issue 7, p901
- ISSN
0219-0249
- Publication type
Article
- DOI
10.1142/S0219024909005518