Additional utility of insiders with imperfect dynamical information |
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Authors: | Email author" target="_blank">José?M?CorcueraEmail author Peter?Imkeller Arturo?Kohatsu-Higa David?Nualart |
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Institution: | (1) Facultat de Matemátiques, Universitat de Barcelona, Gran Via de les Corts Catalanes 585, 08007 Barcelona, Spain;(2) Institut für Mathematik, Humboldt-Universität zu Berlin, Unter den Linden 6, 10999 Berlin, Germany;(3) Department of Economics and Business, Universitat Pompeu Fabra, Ramón Trias Fargas 25-27, 08005 Barcelona, Spain |
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Abstract: | In this paper we consider a market driven by a Wiener process where there is an insider and a regular trader. The insider has privileged information which has been deformed by an independent noise vanishing as the revelation time approaches. At this time, the information of every trader is the same. We obtain the semimartingale decomposition of the original Wiener process under dynamical enlargement of the filtration, and we prove that if the rate at which the additional noise in the insiders information vanishes is slow enough then there is no arbitrage and the additional utility of the insider is finite.Received: 1 October 2003, Mathematics Subject Classification:
60G48, 90A09, 60H07, 90A60JEL Classification:
D82, G11, G14 |
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Keywords: | Insider trading enlargement of filtrations Malliavins calculus" target="_blank">gif" alt="rsquo" align="BASELINE" BORDER="0">s calculus utility maximization arbitrage |
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