The Impact of Large Players on the Formation of Financial Bubbles

This master's thesis explores the influence of large informed players on the dynamics of financial bubbles. The paper presents a modification of the classical Abreu-Brunnermeyer model of rational bubbles by introducing an insider with accurate information about the moment of asset revaluation. Analysis and agent-based modeling show that the presence of an insider leads to an earlier and abrupt collapse of the bubble, and the level of cooperation between major players determines its stability. The model demonstrates the paradoxical stability of bubbles even in the presence of informed participants seeking to maximize profits before the collapse. The obtained results contribute to understanding the nature of financial bubbles, emphasize the importance of monitoring the actions of insiders and may be useful for developing measures for early detection and prevention of bubbles in financial markets.