Insider information and its relation with the arbitrage condition and the utility maximization problem

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dc.contributor.author D'Auria, Bernardo
dc.contributor.author Salmeron Garrido, Jose Antonio
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Estadística
dc.date.accessioned 2019-09-12T15:35:57Z
dc.date.available 2019-09-12T15:35:57Z
dc.date.issued 2019-09-12
dc.identifier.issn 2387-0303
dc.identifier.uri http://hdl.handle.net/10016/28805
dc.description.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.
dc.description.sponsorship This research was partially supported by the Spanish Ministry of Economy and Competitiveness Grants MTM2017-85618-P via FEDER funds and MTM2015-72907-EXP;
dc.language.iso eng
dc.relation.ispartofseries Working paper. Statistics and Econometrics
dc.relation.ispartofseries 19-11
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Optimal Portfolio
dc.subject.other Enlargement Of Filtration
dc.subject.other Value Of The Information
dc.subject.other Arbitrage
dc.subject.other No Free Lunch Vanishing Risk
dc.subject.other Equivalent Martingale Measure
dc.title Insider information and its relation with the arbitrage condition and the utility maximization problem
dc.type workingPaper
dc.rights.accessRights openAccess
dc.relation.projectID Gobierno de España. MTM2017-85618-P
dc.relation.projectID Gobierno de España. MTM2015-72907-EXP
dc.type.version draft
dc.identifier.uxxi DT/0000001726
dc.contributor.funder European Commission
dc.contributor.funder Ministerio de Economía y Competitividad (España)
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