# A monetary value for initial information in portfolio optimization

## Author Info

• Martin Schweizer

()
(LMU München, Mathematisches Institut, Theresienstraße 39, 80333 München, Germany Manuscript)

• Dirk Becherer

()
(Department of Mathematics, Imperial College, 180 Queen's Gate, London SW7 2BZ, UK)

• Jürgen Amendinger

()
(HypoVereinsbank AG, International Markets, Equity Linked Products, Arabellastr. 12, 81925 München, Germany)

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## Abstract

We consider an investor maximizing his expected utility from terminal wealth with portfolio decisions based on the available information flow. This investor faces the opportunity to acquire some additional initial information ${\cal G}$. His subjective fair value of this information is defined as the amount of money that he can pay for ${\cal G}$ such that this cost is balanced out by the informational advantage in terms of maximal expected utility. We study this value for common utility functions in the setting of a complete market modeled by general semimartingales. The main tools are a martingale preserving change of measure and martingale representation results for initially enlarged filtrations.

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## Bibliographic Info

Article provided by Springer in its journal Finance and Stochastics.

Volume (Year): 7 (2003)
Issue (Month): 1 ()
Pages: 29-46

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Handle: RePEc:spr:finsto:v:7:y:2003:i:1:p:29-46

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## Related research

Keywords: Initial enlargement of filtrations; utility maximization; value of information; martingale preserving measure; predictable representation property;

Find related papers by JEL classification:

• G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
• G19 - Financial Economics - - General Financial Markets - - - Other

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## Citations

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Cited by:
1. Stefan Ankirchner, 2005. "Utility duality under additional information: conditional measures versus filtration enlargements," SFB 649 Discussion Papers SFB649DP2005-029, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
2. Stefan Ankirchner & Steffen Dereich & Peter Imkeller, 2005. "The Shannon Information of Filtrations and the Additional Logarithmic Utility of Insiders," SFB 649 Discussion Papers SFB649DP2005-030, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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