A Large Trader-Insider Model

Arturo Kohatsu-Higa and Agnès Sulem
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Arturo Kohatsu-Higa: INRIA-Rocquencourt, Domaine de Voluceau, Rocquencourt, B.P.105, F-78153 Le Chesnay Cedex, France
Agnès Sulem: INRIA-Rocquencourt, Domaine de Voluceau, Rocquencourt, B.P.105, F-78153 Le Chesnay Cedex, France

Chapter 3 in Stochastic Processes and Applications to Mathematical Finance, 2006, pp 101-124 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWe give some remarks on the anticipating approach to insider modelling introduced by the authors recently. In particular, we define forward integrals by using limits of Riemmann sums. This definition is well adapted to financial applications.As an application, we consider a portfolio maximization problem of a large trader with insider information. We show that the forward integral is a natural tool to handle such problems and we compute the optimal portfolios for an insider and a small trader.

Keywords: Stochastic Processes; Mathematical Finance; Malliavin Calculus; Martingale Representation; Chaos Expansion; Levy Processes; Stable Processes; Stochastic Differential Equations; Stochastic Control (search for similar items in EconPapers)
Date: 2006
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