Underlying asset and derivatives: the rationality of the South Sea Bubble reviewed

Actif sous-jacent et produits dérivés: la rationalité de la bulle reconsidérée

Nesrine Bentemessek Kahia ()
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Nesrine Bentemessek Kahia: IRG - Institut de Recherche en Gestion - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12

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Abstract: The systematically dualist analysis of speculative bubbles is not sufficient to capture the differences in investors behavior according to whether they operate in the underlying asset market or the derivatives market. This is particularly well evidenced in the South Sea Bubble study. In this article, we show that in spite of the rational pricing of the South Sea Company's subscription shares as call options, the valuation of the underlying asset, (i.e.) the South Sea Share, did suffer from a confusion regarding future public debt restructuring revenues.

Date: 2014
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Published in Revue Economique, 2014, 5 (65), pp.781-803. ⟨10.3917/reco.655.0781⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01126731

DOI: 10.3917/reco.655.0781

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