The Basic Mathematical Theory Of Asset Pricing Bubbles

In addition to the prosperous development of economics,in the past two decades,theoretical mathematical finance has also made great progress.Some scholars put forward mathematical theories about financial bubbles,the core of which is martingale theory based on no arbitrage in stochastic process.This is instructive to the pricing of derivatives and the analysis of financial bubbles in real life.This article is a reading note on Continuous Time Asset Pricing Theory written by Robert A.Jarrow.It tries to explain the basis of the theory to readers by deducting the formula and connecting it with real life situations.It includes three fundamental theorems of asset pricing,the causes of bubbles under this framework,the property of bubbles,classification of bubbles and the main development of current applications,including stocks,options,forwards,futures,and foreign exchange.It also refers to A Mathematical Theory of Financial Bubbles written by Philip Protter.