Arbitrage and utility maximization in market models with an insider
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Publication:1670397
DOI10.1007/S11579-018-0217-4zbMATH Open1396.91232arXiv1608.02068OpenAlexW2963585706WikidataQ129897536 ScholiaQ129897536MaRDI QIDQ1670397FDOQ1670397
Peter Tankov, Wolfgang J. Runggaldier, Huy N. Chau
Publication date: 5 September 2018
Published in: Mathematics and Financial Economics (Search for Journal in Brave)
Abstract: We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which only becomes known to the ordinary agents at date T, we give criteria for the No Unbounded Profits with Bounded Risk property to hold, characterize optimal arbitrage strategies, and prove duality results for the utility maximization problem faced by the insider. Examples of markets satisfying NUPBR yet admitting arbitrage opportunities are provided for both atomic and continuous random variables G.
Full work available at URL: https://arxiv.org/abs/1608.02068
Recommendations
utility maximizationhedgingincomplete marketsoptimal arbitrageinitial enlargement of filtrationno unbounded profits with bounded risk
Auctions, bargaining, bidding and selling, and other market models (91B26) Utility theory (91B16) Martingales with continuous parameter (60G44)
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Cited In (14)
- Random times at which insiders can have free lunches
- Logarithmic utility maximization for insiders in progressively enlarged filtrations
- Maximizing expected utility in the arbitrage pricing model
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- Additional utility of insiders with imperfect dynamical information
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- Anticipative information in a Brownian-Poisson market
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