In the context of a general semimartingale model, we aim at determining how much an investor is willing to pay to learn additional information that allows achieving arbitrage. If such a value exists, we call it the value of informational arbitrage. We are interested in the case where the information yields arbitrage opportunities but not unbounded profits with bounded risk. As in Amendinger et al. (Finance Stoch. 7:29–46, 2003), we rely on an indifference valuation approach and study optimal consumption–investment problems under initial information and arbitrage. We establish some new results on models with additional information and characterise when the value of informational arbitrage is universal.

The value of informational arbitrage / H.N. Chau, A. Cosso, C. Fontana. - In: FINANCE AND STOCHASTICS. - ISSN 0949-2984. - 24:2(2020 Apr), pp. 277-307. [10.1007/s00780-020-00418-3]

The value of informational arbitrage

A. Cosso
Secondo
;
2020

Abstract

In the context of a general semimartingale model, we aim at determining how much an investor is willing to pay to learn additional information that allows achieving arbitrage. If such a value exists, we call it the value of informational arbitrage. We are interested in the case where the information yields arbitrage opportunities but not unbounded profits with bounded risk. As in Amendinger et al. (Finance Stoch. 7:29–46, 2003), we rely on an indifference valuation approach and study optimal consumption–investment problems under initial information and arbitrage. We establish some new results on models with additional information and characterise when the value of informational arbitrage is universal.
arbitrage; enlargement of filtration; indifference price; martingale representation; value of information
Settore MAT/06 - Probabilita' e Statistica Matematica
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/931963
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