Additional utility of insiders with imperfect dynamical information

José Corcuera (), Peter Imkeller (), Arturo Kohatsu-Higa () and David Nualart ()

Finance and Stochastics, 2004, vol. 8, issue 3, 437-450

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 insider’s information vanishes is slow enough then there is no arbitrage and the additional utility of the insider is finite. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Insider trading; enlargement of filtrations; Malliavin’s calculus; utility maximization; arbitrage (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s00780-003-0119-y

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