The financial value of knowing the distribution of stock prices in discrete market models (Q2278607)

Much of the research into the financial value of information has been in a continuous context. This article explores the topic in a discrete setting. The authors consider the expected utility rather than expected wealth. They concentrate on three different utility functions: log, power, and exponential functions. A definition of the financial value of weak information is provided in terms of expected utility. Assuming a complete market, an expression for this measure is given as the main result of the article. The methodology is then exemplified in a binomial model of two assets.