Wells Fargo & Co. Researchers Discuss Findings in Risk Management (Modeling Financial Bubbles with Optional Semimartingales in Nonstandard Probability Spaces): Insurance – Risk Management

2025 APR 09 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Fresh data on risk management are presented in a new report. According to news reporting from New York City, New York, by NewsRx journalists, research stated, “Deviation of an asset price from its fundamental value, commonly referred to as a price bubble, is a well-known phenomenon in financial markets.”

Financial supporters for this research include Nserc Discovery.

The news reporters obtained a quote from the research from Wells Fargo & Co.: “Mathematically, a bubble arises when the deflated price process transitions from a martingale to a strict local martingale. This paper explores price bubbles using the framework of optional semimartingale calculus within nonstandard probability spaces, where the underlying filtration is not necessarily right-continuous or complete. We present two formulations for financial markets with bubbles: one in which asset prices are modeled as cadlag semimartingales and another where they are modeled as ladlag semimartingales. In both models, we demonstrate that the formation and re-emergence of price bubbles are intrinsically tied to the lack of right continuity in the underlying filtration.”

According to the news editors, the research concluded: “These theoretical findings are illustrated with practical examples, offering novel insights into bubble dynamics that hold significance for both academics and practitioners in the field of mathematical finance.”

For more information on this research see: Modeling Financial Bubbles with Optional Semimartingales in Nonstandard Probability Spaces. Risks, 2025,13(3):53. (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks13030053.

Our news journalists report that more information may be obtained by contacting Mohamed Abdelghani, Wells Fargo & Co., 150 E 42nd St, New York City, NY 10017, United States. Additional authors for this research include Alexander Melnikov.

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