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The value of informational arbitrage. (English) Zbl 1433.91151

Summary: 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 [J. Amendinger et al., ibid. 7, No. 1, 29–46 (2003; Zbl 1035.60069)], 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.

MSC:

91G10 Portfolio theory
60G44 Martingales with continuous parameter
91B44 Economics of information

Citations:

Zbl 1035.60069
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References:

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