UTILITY MAXIMIZATION IN AN INSIDER INFLUENCED MARKET |
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Authors: | Arturo Kohatsu-Higa Agnès Sulem |
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Institution: | Departament of Economics and Business, Universitat Pompeu Fabra; INRIA, Domaine de Voluceau, Le Chesnay Cedex, France |
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Abstract: | We study a controlled stochastic system whose state is described by a stochastic differential equation with anticipating coefficients. This setting is used to model markets where insiders have some influence on the dynamics of prices. We give a characterization theorem for the optimal logarithmic portfolio of an investor with a different information flow from that of the insider. We provide explicit results in the partial information case that we extend in order to incorporate the enlargement of filtration techniques for markets with insiders. Finally, we consider a market with an insider who influences the drift of the underlying price asset process. This example gives a situation where it makes a difference for a small agent to acknowledge the existence of an insider in the market. |
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Keywords: | anticipating systems insider market partial observation control forward integrals Malliavin calculus |
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