A monetary value for initial information in portfolio optimization | Zendy

J�rgen Amendinger | Zendy; Dirk Becherer | Zendy; Martin Schweizer | Zendy

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A monetary value for initial information in portfolio optimization

Author(s) -

J�rgen Amendinger,

Dirk Becherer,

Martin Schweizer

Publication year - 2003

Publication title -

finance and stochastics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.949

H-Index - 50

eISSN - 1432-1122

pISSN - 0949-2984

DOI - 10.1007/s007800200075

Subject(s) - martingale (probability theory) , mathematical finance , portfolio , expected utility hypothesis , economics , portfolio optimization , local martingale , mathematical economics , value (mathematics) , representation (politics) , econometrics , microeconomics , mathematics , financial economics , statistics , politics , political science , law

. We consider an investor maximizing his expected utility from terminal wealth with portfolio decisions based on the available information flow. This investor faces the opportunity to acquire some additional initial information . His subjective fair value of this information is defined as the amount of money that he can pay for such that this cost is balanced out by the informational advantage in terms of maximal expected utility. We study this value for common utility functions in the setting of a complete market modeled by general semimartingales. The main tools are a martingale preserving change of measure and martingale representation results for initially enlarged filtrations.

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