Related papers: The value of informational arbitrage
When an investor is faced with the option to purchase additional information regarding an asset price, how much should she pay? To address this question, we solve for the indifference price of information in a setting where a trader…
We show that under mild assumptions, the total value of information to informed traders in the market can be measured by the covariance between price changes and order flow. This covariance captures noise trader losses, which equal informed…
Argumentation provides a representation of arguments and attacks between these arguments. Argumentation can be used to represent a reasoning process over evidence to reach conclusions. Within such a reasoning process, understanding the…
We propose indifference pricing to estimate the value of the weak information. Our framework allows for tractability, quantifying the amount of additional information, and permits the description of the smallness and the stability with…
There have been numerous attempts in explaining the general learning behaviours using model-based and model-free methods. While the model-based control is flexible yet computationally expensive in planning, the model-free control is quick…
Information value, a measure for decision sensitivity, can provide essential information in engineering and environmental assessments. It quantifies the potential for improved decision-making when reducing uncertainty in specific inputs. By…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
We present results on simulations of a stock market with heterogeneous, cumulative information setup. We find a non-monotonic behaviour of traders' returns as a function of their information level. Particularly, the average informed agents…
In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…
A seller sells an object over time but is uncertain how the buyer learns their willingness-to-pay. We consider informational robustness under \textit{limited commitment}, where the seller offers a price \textit{each period} to maximize…
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…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
We investigate a pricing rule that is applicable for streams of income or contingent claim liabilities and study how this rule changes under additional insider-type information that an investor might obtain. Considering a model where the…
An asymmetric information model is introduced for the situation in which there is a small agent who is more susceptible to the flow of information in the market than the general market participant, and who tries to implement strategies…
We consider stopping problems in which a decision maker (DM) faces an unknown state of nature and decides sequentially whether to stop and take an irreversible action; pay a fee and obtain additional information; or wait without acquiring…
In financial markets valuable information is rarely circulated homogeneously, because of time required for information to spread. However, advances in communication technology means that the 'lifetime' of important information is typically…
We study super--replication of European contingent claims in an illiquid market with insider information. Illiquidity is captured by quadratic transaction costs and insider information is modeled by an investor who can peek into the future.…
In decision problems under incomplete information, actions (identified to payoff vectors indexed by states of nature) and beliefs are naturally paired by bilinear duality. We exploit this duality to analyze the value of information, using…
We study the role of costly information in non-cooperative two-player games when an extrinsic third party information broker is introduced asymmetrically, allowing one player to obtain information about the other player's action. This…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…