ASYMMETRIC INFORMATION IN A FINANCIAL MARKET WITH JUMPS (Q4528081)

An insider trader is operating on a continuous time financial market where the asset prices are discontinuous; they are driven by a couple (Brownian motion-compound Poisson process): \[ S^i_t=S^i_0= \int^t_0S^i_s b^i_s ds+\int^t_0 S^i_s(\sigma^i_s,W_s) +\int^t_0S^i_s ( \rho^i_s,dM_S), \quad 0\leq t\leq T,\;i=1,\dots,d. \] The process \(M=N+ \int^._0\lambda_sds\), where \(N\) is a Poisson process, the intensity \(\lambda\) is a process \({\mathcal F}_0\)-measurable. As usual, there exists a bond, riskless asset. Hypotheses on the parameters are chosen so that the market is viable and complete. The insider trader knows an anticipative information on the market: an \({\mathcal F}_T\)-measurable variable \(L\), such that \(\forall t<T\), the conditional law of \(L\) given \({\mathcal F}_t\) is equivalent to the law of \(L\). Using the enlargement of filtrations, the author shows that, from the insider trader's point of view, the market is again viable and complete. An explicit optimal strategy for him is exhibited. Finally, some examples are done where the different hypotheses are satisfied.