Related papers: The insider problem in the trinomial model: a disc…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
The information dynamics in finance and insurance applications is usually modeled by a filtration. This paper looks at situations where information restrictions apply such that the information dynamics may become non-monotone. A fundamental…
We model continuous-time information flows generated by a number of information sources that switch on and off at random times. By modulating a multi-dimensional L\'evy random bridge over a random point field, our framework relates the…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
This paper studies the question of filtering and maximizing terminal wealth from expected utility in a partially information stochastic volatility models. The special features is that the only information available to the investor is the…
This paper establishes a general equivalence between discrete choice and rational inattention models. Matejka and McKay (2015, AER) showed that when information costs are modelled using the Shannon entropy function, the resulting choice…
We consider the classical multi-asset Merton investment problem under drift uncertainty, i.e. the asset price dynamics are given by geometric Brownian motions with constant but unknown drift coefficients. The investor assumes a prior drift…
We study the anticipating version of the classical portfolio optimization problem in a financial market with the presence of a trader who possesses privileged information about the future (insider information), but who is also subjected to…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
The binary information collects all those events that may or may not occur. With this kind of variables, a large amount of information can be captured, in particular, about financial assets and their future trends. In our paper, we assume…
This article studies the problem of evaluating the information that a Principal lacks when establishing an incentive contract with an Agent whose effort is not observable. The Principal ("she") pays a continuous rent to the Agent ("he"),…
We consider the mean-variance hedging problem under partial Information. The underlying asset price process follows a continuous semimartingale and strategies have to be constructed when only part of the information in the market is…
The main objective of this paper is to develop a martingale-type solution to optimal consumption--investment choice problems ([Merton, 1969] and [Merton, 1971]) under time-varying incomplete preferences driven by externalities such as…
The statistical analysis of data stemming from dynamical systems, including, but not limited to, time series, routinely relies on the estimation of information theoretical quantities, most notably Shannon entropy. To this purpose, possibly…
We consider the problem of optimal investment and consumption in a class of multidimensional jump-diffusion models in which asset prices are subject to mutually exciting jump processes. This captures a type of contagion where each downward…
In a unified framework we study equilibrium in the presence of an insider having information on the signal of the firm value, which is naturally connected to the fundamental price of the firm related asset. The fundamental value itself is…