Asset Bubble Pricing Model And Related Analytical Application

This thesis summarized most classical asset bubble pricing models based on the study on asset bubbles'historical, definition, existence, generating process and all kinds of model classification. We generalized the basic periodical bursting bubble model (Evans 1991) from all the model parameters and conditions, making the model more complicated and realistic. With Monte Carlo technical, we have made asset bubble numerical simulation, showing bubble generating and disappearance and regenerating and disappearance process. We analyzed the bubble period fat tail problem, coming to the profound conclusion that asset market returns embedded with related bubbles and the price difference follow fat-tail distribution. The thesis also studied the European option pricing problem when both the fundamental and bubble parts are driven by the geometric brown motion, and proved that the European call (put) option theoretical price is strictly lower (higher) than the classical Black Sholes Model price. Meanwhile,based on numerical results, we roughly recognized that the conclusion above also holds under the generalized periodical multi-step bursting model. Finally, we made option delta hedging research under such model similar to the single option hedging.