# The Formation of Financial Bubbles in Defaultable Markets

@article{Biagini2015TheFO, title={The Formation of Financial Bubbles in Defaultable Markets}, author={Francesca Biagini and Sorin Nedelcu}, journal={SIAM J. Financial Math.}, year={2015}, volume={6}, pages={530-558} }

In this paper we study the formation of financial bubbles in the valuation of defaultable claims in a reduced-form setting. The birth of a bubble is caused by the impact of trading activity of investors, who consider the claim to be a safe investment under some circumstances. We also show how microeconomic interactions may, at an aggregate level, determine a shift in the martingale measure. In this way we establish a connection between our approach and the martingale theory of bubbles; see [F…

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