Bubbles as payoffs at infinity (*)

Christian Gilles and Stephen LeRoy
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Christian Gilles: Board of Governors, Federal Reserve System, Washington, DC 20551, USA

Economic Theory, 1997, vol. 9, issue 2, 281 pages

Abstract: We define rational bubbles to be securities with payoffs occurring in the infinitely distant future and investigate the behavior of bubbles values. We extend our analysis to a setting of uncertainty. In an infinite horizon arbitrage-free model of asset prices, we interpret the money market account as the value of a particular bubble; a similar interpretation holds for other assets related to the state-price deflator and to payoffs on bonds maturing in the distant future. We present three applications of this characterization of bubbles.

JEL-codes: D50 E30 (search for similar items in EconPapers)
Date: 1997
Note: Received: October 9, 1992; revised version December 1, 1995
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Working Paper: Bubbles as Payoffs at Infinity (2019)
Working Paper: Bubbles as payoffs at infinity (1996)
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