Optimal Portfolios for Different Anticipating Integrals under Insider Information

Carlos Escudero and Sandra Ranilla-Cortina
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Carlos Escudero: Departamento de Matemáticas Fundamentales, Universidad Nacional de Educación a Distancia, 28040 Madrid, Spain
Sandra Ranilla-Cortina: Departamento de Análisis Matemático y Matemática Aplicada, Universidad Complutense de Madrid, 28040 Madrid, Spain

Mathematics, 2020, vol. 9, issue 1, 1-19

Abstract: We consider the non-adapted version of a simple problem of portfolio optimization in a financial market that results from the presence of insider information. We analyze it via anticipating stochastic calculus and compare the results obtained by means of the Russo-Vallois forward, the Ayed-Kuo, and the Hitsuda-Skorokhod integrals. We compute the optimal portfolio for each of these cases with the aim of establishing a comparison between these integrals in order to clarify their potential use in this type of problem. Our results give a partial indication that, while the forward integral yields a portfolio that is financially meaningful, the Ayed-Kuo and the Hitsuda-Skorokhod integrals do not provide an appropriate investment strategy for this problem.

Keywords: insider trading; Hitsuda-Skorokhod integral; Russo-Vallois forward integral; Ayed-Kuo integral; anticipating stochastic calculus; optimal portfolios (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2020
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