Please use this identifier to cite or link to this item:
Amendinger, Jürgen
Imkeller, Peter
Schweizer, Martin
Year of Publication: 
Series/Report no.: 
SFB 373 Discussion Paper 1998,25
In this paper, we consider a security market in which two investors on different information levels maximize their expected logarithmic utility from terminal wealth. While the ordinary investor's portfolio decisions are based on a public information flow, the insider possesses from the beginning extra information about the outcome of some random variable G, e.g., the future price of a stock. We solve the two optimization problems explicitly and rewrite the insider's additional expected logarithmic utility in terms of a relative entropy. This allows us to provide simple conditions on G for the finiteness of this additional utility and to show that it is basically given by the entropy of G.
insider trading
utility maximization
initial enlargement of filtrations
relative entropy
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.