Publication: Insider information and its relation with the arbitrage condition and the utility maximization problem
Loading...
Identifiers
Publication date
2019-09-12
Defense date
Advisors
Tutors
Journal Title
Journal ISSN
Volume Title
Publisher
Impact
Export
Abstract
Within the well-known framework of financial portfolio optimization, we analyze
the existing relationships between the condition of arbitrage and the utility
maximization in presence of insider information. That is, we assume that, since
the initial time, the information flow is altered by adding the knowledge of an additional random variable including future information. In this context we study
the utility maximization problem under the logarithmic and the Constant Relative
Risk Aversion (CRRA) utilities, with and without the restriction of no temporarybankruptcy. For the latter case we obtain an optimal strategy different from the one computed in [1]. We give various examples for which the insider information
create arbitrage, and for which the logarithmic maximization problem is bounded
or unbounded. We conclude with an interesting result, showing that the insider
information may not lead to any arbitrage.
Description
Keywords
Optimal Portfolio, Enlargement Of Filtration, Value Of The Information, Arbitrage, No Free Lunch Vanishing Risk, Equivalent Martingale Measure