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Optimal portfolios for different anticipating integrals under insider information

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  • Carlos Escudero
  • Sandra Ranilla-Cortina

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.

Suggested Citation

  • Carlos Escudero & Sandra Ranilla-Cortina, 2020. "Optimal portfolios for different anticipating integrals under insider information," Papers 2007.02316, arXiv.org, revised Jan 2021.
    • Handle: RePEc:arx:papers:2007.02316
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    References listed on IDEAS

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    1. Jorge A. León & Reyla Navarro & David Nualart, 2003. "An Anticipating Calculus Approach to the Utility Maximization of an Insider," Mathematical Finance, Wiley Blackwell, vol. 13(1), pages 171-185, January.
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    Cited by:

    1. Mauricio Elizalde & Carlos Escudero & Tomoyuki Ichiba, 2022. "Optimal investment with insider information using Skorokhod & Russo-Vallois integration," Papers 2211.07471, arXiv.org.
    2. Chao Yu & Yuhan Cheng, 2023. "Malliavin Calculus and Its Application to Robust Optimal Investment for an Insider," Mathematics, MDPI, vol. 11(20), pages 1-38, October.
    3. Mauricio Elizalde & Carlos Escudero, 2021. "Chances for the honest in honest versus insider trading," Papers 2106.10033, arXiv.org, revised May 2022.

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