The financial value of knowing the distribution of stock prices in discrete market models

Ayelet Amiran, Fabrice Baudoin, Skylyn Brock, Berend Coster, Ryan Craver, Ugonna Ezeaka, Phanuel Mariano and Mary Wishart

Papers from arXiv.org

Abstract: An explicit formula is derived for the value of weak information in a discrete time model that works for a wide range of utility functions including the logarithmic and power utility. We assume a complete market with a finite number of assets and a finite number of possible outcomes. Explicit calculations are performed for a binomial model with two assets. The case of trinomial models is also discussed.

Date: 2018-08
New Economics Papers: this item is included in nep-upt
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Published in Involve 12 (2019) 883-899

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1808.03186

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