This paper covers asymmetric information in nancial mar- kets from a micro perspective. Particularly, we aim to extend the as- set pricing framework introduced by Guasoni [2], which models price dynamics with both a martingale component, described by permanent shocks, and a stationary component, given by temporary shocks. First, we derive a generalization of this asset pricing model using n Brown- ian Motions, including an Ornstein-Uhlenbeck process as the (n + 1)th element. We nd non-Markovian dynamics for the partially informed agents, which questions the validity of the ecient market hypothesis. Moreover, we compare the positions of informed and partially informed agents. Thereby, the ltration for informed agents is larger and initially specied, whereas the ltration for partially informed agents is smaller and obtained from the Hitsuda representation [3]. Our study examines the logarithmic utility maximization problem.

Asymmetric information in a market with n + 1 Brownian motions

Luigi Romano
;
Donato Scolozzi
2018

Abstract

This paper covers asymmetric information in nancial mar- kets from a micro perspective. Particularly, we aim to extend the as- set pricing framework introduced by Guasoni [2], which models price dynamics with both a martingale component, described by permanent shocks, and a stationary component, given by temporary shocks. First, we derive a generalization of this asset pricing model using n Brown- ian Motions, including an Ornstein-Uhlenbeck process as the (n + 1)th element. We nd non-Markovian dynamics for the partially informed agents, which questions the validity of the ecient market hypothesis. Moreover, we compare the positions of informed and partially informed agents. Thereby, the ltration for informed agents is larger and initially specied, whereas the ltration for partially informed agents is smaller and obtained from the Hitsuda representation [3]. Our study examines the logarithmic utility maximization problem.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11587/427382
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact