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Optimal Logarithmic Utility And Optimal Portfolios For An Insider In A Stochastic Volatility Market

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  • CHRISTIAN-OLIVER EWALD

    (Department of Mathematics, Erwin Schrödinger Strasse, University of Kaiserslautern, 67663 Kaiserslautern, Germany)

Abstract

We combine methods for portfolio optimization in incomplete markets which are due to Karatzas et al. [6] with methods proposed by Nualart based on Malliavin Calculus to model insider trading within a stochastic volatility model. We compute the optimal portfolio within a certain set of insider strategies for a general stochastic volatility model but also apply the methods to explicit examples. We further discuss how the Heston model fits into this context.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.

Volume (Year): 08 (2005)
Issue (Month): 03 ()
Pages: 301-319

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Handle: RePEc:wsi:ijtafx:v:08:y:2005:i:03:p:301-319

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Related research

Keywords: Malliavin Calculus; analysis on Wiener space; insider trading; portfolio optimization;

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Cited by:
  1. Elisa Alòs & Christian-Olivier Ewald, 2005. "A note on the Malliavin differentiability of the Heston volatility," Economics Working Papers 880, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Christian-Oliver Ewald & Zhaojun Yang, 2008. "Utility based pricing and exercising of real options under geometric mean reversion and risk aversion toward idiosyncratic risk," Computational Statistics, Springer, vol. 68(1), pages 97-123, August.
  3. Ewald, Christian-Oliver & Xiao, Yajun, 2007. "Information : Price And Impact On General Welfare And Optimal Investment. An Anticipative Stochastic Differential Game Model," MPRA Paper 3301, University Library of Munich, Germany.

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