Editor:
Universidad Carlos III de Madrid. Departamento de Estadística
Issued date:
2019-09-12
ISSN:
2387-0303
xmlui.dri2xhtml.METS-1.0.item-contributor-funder:
European Commission Ministerio de Economía y Competitividad (España)
Sponsor:
This research was partially supported by the Spanish Ministry of Economy and Competitiveness Grants MTM2017-85618-P via FEDER funds and MTM2015-72907-EXP;
Serie/No.:
Working paper. Statistics and Econometrics 19-11
Project:
Gobierno de España. MTM2017-85618-P Gobierno de España. MTM2015-72907-EXP
Keywords:
Optimal Portfolio
,
Enlargement Of Filtration
,
Value Of The Information
,
Arbitrage
,
No Free Lunch Vanishing Risk
,
Equivalent Martingale Measure
Rights:
Atribución-NoComercial-SinDerivadas 3.0 España
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, tWithin 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.[+][-]