arXiv subjects

José Antonio Salmerón

Publications and source records attributed to José Antonio Salmerón.

3 recordsLinked to original sources

arXiv2024

Optimal portfolios with anticipating information on the stochastic interest rate

By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine diffusion process, we obtain explicit formulas for the additional expected logarithmic utility in solving the optimal portfolio problem. We begin by solving the problem when the additional information directly refers to the interest rate process, and then extend the analysis to the case where the information relates to the values of an underlying Markov chain. The dynamics of this chain may depend on anticipated market information, jump at predefined epochs, and modulate the parameters of the stochastic interest rate process. The theoretical study is then complemented by an illustrative numerical analysis.

q-fin.PR↗

arXiv2019

Insider information and its relation with the arbitrage condition and the utility maximization problem

Within the well-known framework of financial portfolio optimization, we analyze the existing relationships between the condition of arbitrage and the utility maximization in presence of \emph{insider information}. We assume that, since the initial time, the information flow is altered by adding the knowledge of an additional random variable including future information. In this context we study the utility maximization problem under the logarithmic and the Constant Relative Risk Aversion (CRRA) utilities, with and without the restriction of no temporary-bankruptcy. In particular, we show that the value of the insider information may be bounded while the arbitrage condition holds and we prove that the insider information does not always imply arbitrage for the insider by providing an explicit example.

q-fin.MF↗

arXiv2019

A short note on "Anticipative portfolio optimization"

In 1996, Pikovsky and Karatzas did one of the earliest studies on portfolio optimization problems in presence of insider information. They were able to successfully show that the knowledge of the stock price at future time is an insider information with associated unbounded value. However when the insider information only gives an interval containing the future value of the stock price, they could not prove that the value of the information is finite. They made a conjecture of this result and tried to convince about its validity by showing some numerical approximations. Instead of applying more sophisticated results, such as Shannons information theory, we show that their conjecture holds true by giving a simple proof of the finiteness of the value of the insider information for this case.

math.PR↗