m-Double Poisson Lévy markets

W. Buckley, H. Long and S. Perera

Quantitative Finance, 2020, vol. 20, issue 10, 1663-1679

Abstract: We develop novel mispricing of markets under asymmetric information and jumps for informed and uninformed investors, called m-Double Poisson markets, driven by independent Double Poisson processes. In the special case m = 1, called the Double Poisson pure-jump Lévy market, both types of investors hold the same optimal portfolio and expected utility, and hence, the informed investor has no utility advantage over the uninformed. For the general market, instantaneous centralized moments of returns are used to compute optimal portfolios and utilities. The mean, variance, skewness and kurtosis of instantaneous returns are reported using jump amplitudes and frequencies.

Date: 2020
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DOI: 10.1080/14697688.2020.1747633

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