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Optimal Smooth Portfolio Selection for an Insider

Part of: Stochastic processes Stochastic analysis

Published online by Cambridge University Press:  14 July 2016

Yaozhong Hu  and
Bernt Øksendal
Yaozhong Hu*
Affiliation:
University of Kansas
Bernt Øksendal*
Affiliation:
University of Oslo and Norwegian School of Economics and Business Administration
*
∗Postal address: Department of Mathematics, University of Kansas, 405 Snow Hall, Lawrence, KS 66045-2142, USA. Email address: hu@math.ku.edu
∗∗Postal address: Center of Mathematics for Applications (CMA), Department of Mathematics, University of Oslo, Box 1053 Blindern, Oslo, N-0316, Norway. Email address: oksendal@math.uio.no
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Abstract

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We study the optimal portfolio problem for an insider, in the case where the performance is measured in terms of the logarithm of the terminal wealth minus a term measuring the roughness and the growth of the portfolio. We give explicit solutions in some cases. Our method uses stochastic calculus of forward integrals.

Keywords

Insider tradingoptimal portfolioenlargement of filtrationlog utilityinformation flow

MSC classification

Secondary: 60H40: White noise theory 60H05: Stochastic integrals 60G15: Gaussian processes
Type
Research Article
Information
Journal of Applied Probability , Volume 44 , Issue 3 , September 2007 , pp. 742 - 752
Copyright
Copyright © Applied Probability Trust 2007 

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