Skip to main content
Erschienen in: Finance and Stochastics 1/2015

01.01.2015

Portfolio optimization with insider’s initial information and counterparty risk

verfasst von: Caroline Hillairet, Ying Jiao

Erschienen in: Finance and Stochastics | Ausgabe 1/2015

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config
loading …

Abstract

We study the gain of an insider having private information which concerns the default risk of a counterparty. More precisely, the default time τ is modelled as the first time a stochastic process hits a random threshold L. The insider knows this threshold (as it can be the case for the manager of the counterparty) and this information is modelled by using an initial enlargement of filtration. The standard investors only observe the value of the threshold at the default time and estimate the default event by its conditional density process. The financial market consists of a risk-free asset and a risky asset whose price is exposed to a sudden jump at the default time of the counterparty. All investors aim to maximize the expected utility from terminal wealth given their own information at the initial date. We solve the optimization problem under short-selling and buying constraints and we compare through numerical illustrations the optimal processes for the insider and the standard investors.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Anhänge
Nur mit Berechtigung zugänglich
Fußnoten
1
We leave for future work the case where the threshold can be adjusted dynamically.
 
2
The proof is based on the relationship between the two key processes p() and α(τ ). More precisely, the coefficient \(\frac{p_{T}(\ell)}{\alpha_{T}(\tau _{\ell})}\) coincides with the ratio between the Lagrange multipliers for the insider and the standard investor, respectively.
 
3
Meaning that for any t≥0, the function \(Y^{i}_{t}(\cdot)\) is \(\mathcal{F}_{t}\otimes\mathcal{B}(\mathbb{R}_{+})\)-measurable.
 
Literatur
1.
Zurück zum Zitat Amendinger, J.: Martingale representation theorems for initially enlarged filtrations. Stoch. Process. Appl. 89, 101–116 (2000) CrossRefMATHMathSciNet Amendinger, J.: Martingale representation theorems for initially enlarged filtrations. Stoch. Process. Appl. 89, 101–116 (2000) CrossRefMATHMathSciNet
2.
Zurück zum Zitat Amendinger, J., Becherer, D., Schweizer, M.: A monetary value for initial information in portfolio optimization. Finance Stoch. 7, 29–46 (2003) CrossRefMATHMathSciNet Amendinger, J., Becherer, D., Schweizer, M.: A monetary value for initial information in portfolio optimization. Finance Stoch. 7, 29–46 (2003) CrossRefMATHMathSciNet
3.
Zurück zum Zitat Baudoin, F.: Modelling anticipations on financial markets. In: Carmona, R.A., et al. (eds.) Paris–Princeton Lectures on Mathematical Finance. Lecture Notes in Mathematics, vol. 1814, pp. 43–94. Springer, New York (2003) Baudoin, F.: Modelling anticipations on financial markets. In: Carmona, R.A., et al. (eds.) Paris–Princeton Lectures on Mathematical Finance. Lecture Notes in Mathematics, vol. 1814, pp. 43–94. Springer, New York (2003)
4.
Zurück zum Zitat Beneš, V.E.: Existence of optimal strategies based on specified information for a class of stochastic decision problems. SIAM J. Comput. Optim. 8, 179–189 (1970) MATH Beneš, V.E.: Existence of optimal strategies based on specified information for a class of stochastic decision problems. SIAM J. Comput. Optim. 8, 179–189 (1970) MATH
5.
Zurück zum Zitat Bielecki, T.R., Rutkowski, M.: Credit Risk: Modeling, Valuation and Hedging. Springer, Berlin (2002) Bielecki, T.R., Rutkowski, M.: Credit Risk: Modeling, Valuation and Hedging. Springer, Berlin (2002)
6.
Zurück zum Zitat El Karoui, N., Jeanblanc, M., Jiao, Y.: What happens after a default: the conditional density approach. Stoch. Process. Appl. 120, 1011–1032 (2010) CrossRefMATHMathSciNet El Karoui, N., Jeanblanc, M., Jiao, Y.: What happens after a default: the conditional density approach. Stoch. Process. Appl. 120, 1011–1032 (2010) CrossRefMATHMathSciNet
7.
Zurück zum Zitat El Karoui, N., Jeanblanc, M., Jiao, Y., Zargari, B.: Conditional default probability and density. In: Kabanov, Yu., et al. (eds.) Inspired by Finance: the Musiela Festschrift, pp. 201–219. Springer, Berlin (2014) CrossRef El Karoui, N., Jeanblanc, M., Jiao, Y., Zargari, B.: Conditional default probability and density. In: Kabanov, Yu., et al. (eds.) Inspired by Finance: the Musiela Festschrift, pp. 201–219. Springer, Berlin (2014) CrossRef
8.
Zurück zum Zitat Grorud, A., Pontier, M.: Insider trading in a continuous time market model. Int. J. Theor. Appl. Finance 1, 331–347 (1998) CrossRefMATH Grorud, A., Pontier, M.: Insider trading in a continuous time market model. Int. J. Theor. Appl. Finance 1, 331–347 (1998) CrossRefMATH
9.
Zurück zum Zitat Hillairet, C.: Existence of an equilibrium on a financial market with discontinuous prices, asymmetric information and non trivial initial σ-fields. Math. Finance 15, 99–117 (2005) CrossRefMATHMathSciNet Hillairet, C.: Existence of an equilibrium on a financial market with discontinuous prices, asymmetric information and non trivial initial σ-fields. Math. Finance 15, 99–117 (2005) CrossRefMATHMathSciNet
10.
Zurück zum Zitat Hillairet, C., Jiao, Y.: Information asymmetry in pricing of credit derivatives. Int. J. Theor. Appl. Finance 14, 611–633 (2011) CrossRefMATHMathSciNet Hillairet, C., Jiao, Y.: Information asymmetry in pricing of credit derivatives. Int. J. Theor. Appl. Finance 14, 611–633 (2011) CrossRefMATHMathSciNet
11.
Zurück zum Zitat Hillairet, C., Jiao, Y.: Credit risk with asymmetric information on the default threshold. Stochastics 84, 183–198 (2012) MATHMathSciNet Hillairet, C., Jiao, Y.: Credit risk with asymmetric information on the default threshold. Stochastics 84, 183–198 (2012) MATHMathSciNet
12.
Zurück zum Zitat Howard, R.: Dynamic Programming and Markov Processes. MIT Press, Cambridge (1960) MATH Howard, R.: Dynamic Programming and Markov Processes. MIT Press, Cambridge (1960) MATH
13.
Zurück zum Zitat Jacod, J.: Calcul Stochastique et Problèmes de Martingales. Lecture Notes in Mathematics, vol. 714. Springer, New York (1979) MATH Jacod, J.: Calcul Stochastique et Problèmes de Martingales. Lecture Notes in Mathematics, vol. 714. Springer, New York (1979) MATH
14.
Zurück zum Zitat Jacod, J.: Grossissement initial, hypothèse (H’) et théorème de Girsanov. In: Jeulin, T., Yor, M. (eds.) Grossissements de Filtrations: Exemples et Applications. Séminaire de Calcul Stochastique 1982/83. Lecture Notes in Mathematics, vol. 1118, pp. 15–35. Springer, New York (1985) CrossRef Jacod, J.: Grossissement initial, hypothèse (H’) et théorème de Girsanov. In: Jeulin, T., Yor, M. (eds.) Grossissements de Filtrations: Exemples et Applications. Séminaire de Calcul Stochastique 1982/83. Lecture Notes in Mathematics, vol. 1118, pp. 15–35. Springer, New York (1985) CrossRef
15.
Zurück zum Zitat Jeulin, J.: Semi-martingales et Grossissement d’une Filtration. Lecture Notes, vol. 833. Springer, Berlin (1980) MATH Jeulin, J.: Semi-martingales et Grossissement d’une Filtration. Lecture Notes, vol. 833. Springer, Berlin (1980) MATH
16.
Zurück zum Zitat Jiao, Y., Pham, H.: Optimal investment with counterparty risk: a default-density model approach. Finance Stoch. 15, 725–753 (2011) CrossRefMathSciNet Jiao, Y., Pham, H.: Optimal investment with counterparty risk: a default-density model approach. Finance Stoch. 15, 725–753 (2011) CrossRefMathSciNet
17.
Zurück zum Zitat Kharroubi, I., Lim, T.: Progressive enlargement of filtrations and backward stochastic differential equations with jumps. J. Theor. Probab. 27, 683–724 (2014) CrossRefMathSciNet Kharroubi, I., Lim, T.: Progressive enlargement of filtrations and backward stochastic differential equations with jumps. J. Theor. Probab. 27, 683–724 (2014) CrossRefMathSciNet
18.
Zurück zum Zitat Merton, R.: Lifetime portfolio selection under uncertainty: the continuous time case. Rev. Econ. Stat. 51, 239–265 (1969) CrossRef Merton, R.: Lifetime portfolio selection under uncertainty: the continuous time case. Rev. Econ. Stat. 51, 239–265 (1969) CrossRef
19.
20.
Zurück zum Zitat Song, S.: Optional splitting formula in a progressively enlarged filtration. ESAIM Probab. Stat. (2014, to appear). Available at arXiv:1208.4149v2 Song, S.: Optional splitting formula in a progressively enlarged filtration. ESAIM Probab. Stat. (2014, to appear). Available at arXiv:​1208.​4149v2
Metadaten
Titel
Portfolio optimization with insider’s initial information and counterparty risk
verfasst von
Caroline Hillairet
Ying Jiao
Publikationsdatum
01.01.2015
Verlag
Springer Berlin Heidelberg
Erschienen in
Finance and Stochastics / Ausgabe 1/2015
Print ISSN: 0949-2984
Elektronische ISSN: 1432-1122
DOI
https://doi.org/10.1007/s00780-014-0246-7

Weitere Artikel der Ausgabe 1/2015

Finance and Stochastics 1/2015 Zur Ausgabe