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Information uncertainty related to marked random times and optimal investment

Author

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  • Ying Jiao

    (SAF)

  • Idris Kharroubi

    (CREST, CEREMADE)

Abstract

We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of information are considered. We first make precise the insider's information flow by using the theory of enlargement of filtrations and then obtain explicit logarithmic utility maximization results to compare optimal wealth for the insider and the ordinary agent. MSC: 60G20, 91G40, 93E20

Suggested Citation

  • Ying Jiao & Idris Kharroubi, 2016. "Information uncertainty related to marked random times and optimal investment," Papers 1607.02743, arXiv.org, revised Mar 2017.
  • Handle: RePEc:arx:papers:1607.02743
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    File URL: http://arxiv.org/pdf/1607.02743
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    References listed on IDEAS

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    1. repec:dau:papers:123456789/5717 is not listed on IDEAS
    2. R. J. Elliott & M. Jeanblanc & M. Yor, 2000. "On Models of Default Risk," Mathematical Finance, Wiley Blackwell, vol. 10(2), pages 179-195.
    3. repec:dau:papers:123456789/409 is not listed on IDEAS
    4. repec:dau:papers:123456789/9697 is not listed on IDEAS
    5. Campi, Luciano & Polbennikov, Simon & Sbuelz, Alessandro, 2009. "Systematic equity-based credit risk: A CEV model with jump to default," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 93-108, January.
    6. Blanchet-Scalliet, Christophette & El Karoui, Nicole & Jeanblanc, Monique & Martellini, Lionel, 2008. "Optimal investment decisions when time-horizon is uncertain," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1100-1113, December.
    7. Peter Carr & Vadim Linetsky, 2006. "A jump to default extended CEV model: an application of Bessel processes," Finance and Stochastics, Springer, vol. 10(3), pages 303-330, September.
    8. Xin Guo & Robert A. Jarrow & Yan Zeng, 2009. "Modeling The Recovery Rate In A Reduced Form Model," Mathematical Finance, Wiley Blackwell, vol. 19(1), pages 73-97.
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