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Additional utility of insiders with imperfect dynamical information

Author

Listed:
  • José Corcuera

    ()

  • Peter Imkeller

    ()

  • Arturo Kohatsu-Higa

    ()

  • David Nualart

    ()

Abstract

In this paper we consider a market driven by a Wiener process where there is an insider and a regular trader. The insider has privileged information which has been deformed by an independent noise vanishing as the revelation time approaches. At this time, the information of every trader is the same. We obtain the semimartingale decomposition of the original Wiener process under dynamical enlargement of the filtration, and we prove that if the rate at which the additional noise in the insider’s information vanishes is slow enough then there is no arbitrage and the additional utility of the insider is finite. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • José Corcuera & Peter Imkeller & Arturo Kohatsu-Higa & David Nualart, 2004. "Additional utility of insiders with imperfect dynamical information," Finance and Stochastics, Springer, vol. 8(3), pages 437-450, August.
  • Handle: RePEc:spr:finsto:v:8:y:2004:i:3:p:437-450
    DOI: 10.1007/s00780-003-0119-y
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    File URL: http://hdl.handle.net/10.1007/s00780-003-0119-y
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    Citations

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    Cited by:

    1. Caroline Hillairet & Ying Jiao, 2012. "Credit Risk with asymmetric information on the default threshold," Post-Print hal-00663136, HAL.
    2. Bruno Bouchard, 2005. "No-arbitrage in discrete-time markets with proportional transaction costs and general information structure," Papers math/0501045, arXiv.org.
    3. Jos'e Manuel Corcuera & Giulia Di Nunno & Gergely Farkas & Bernt {O}ksendal, 2014. "A continuous auction model with insiders and random time of information release," Papers 1411.2835, arXiv.org, revised Mar 2018.
    4. Anne Eyraud-Loisel, 2013. "Quadratic hedging in an incomplete market derived by an influent informed investor," Post-Print hal-00450949, HAL.
    5. Kasper Larsen & Gordan Zitkovic, 2007. "On the semimartingale property via bounded logarithmic utility," Papers 0706.0468, arXiv.org.
    6. Kohatsu-Higa, Arturo & Yamazato, Makoto, 2008. "Enlargement of filtrations with random times for processes with jumps," Stochastic Processes and their Applications, Elsevier, vol. 118(7), pages 1136-1158, July.
    7. Albina Danilova & Michael Monoyios & Andrew Ng, 2009. "Optimal investment with inside information and parameter uncertainty," Papers 0911.3117, arXiv.org, revised Feb 2010.
    8. Hillairet, Caroline, 2005. "Comparison of insiders' optimal strategies depending on the type of side-information," Stochastic Processes and their Applications, Elsevier, vol. 115(10), pages 1603-1627, October.
    9. Olfa Draouil & Bernt {O}ksendal, 2018. "Viable Insider Markets," Papers 1801.03720, arXiv.org.
    10. Caroline Hillairet & Ying Jiao, 2010. "Information Asymmetry in Pricing of Credit Derivatives," Papers 1002.3256, arXiv.org.
    11. Caroline Hillairet & Ying Jiao, 2010. "Information Asymmetry in Pricing of Credit Derivatives," Working Papers hal-00457456, HAL.

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