Utility duality under additional information: conditional measures versus filtration enlargements
AbstractThe utility maximisation problem is considered for investors with anticipative additional information. We distinguish between models with conditional measures and models with enlarged filtrations. The dual functions of the maximal expected utility are determined with the help of f-divergences. We assume that our measures are absolutely continuous with respect to a local martingale measure (LMM), but not necessarily equivalent. Thus we do not exclude arbitrage.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2005-029.
Length: 28 pages
Date of creation: May 2005
Date of revision:
utility maximisation; additional information; enlargement of filtrations; conditional measures; convex conjugate function; dual function; f-divergence;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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