CHINESE JOURNAL OF APPLIED PROBABILITY AND STATIST 2007, 23(1) 84-90 DOI:      ISSN: 1001-4268 CN: 31-1256

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Optimal Utility with Side Information and its Affect

Xiong Dewen

Abstract��

We first consider the problem of representation of the $Q$-martingale $\{\wt{\Lambda}_t :=\ep^Q[\Lambda_T|{\cal G}_t]\}$. Then we consider a market of a stock price affected by a stochastic factor, in which there exists a insider who only knows the price information and a side information. We consider his problem of optimal utility for terminal wealth with and without side-information, and obtain a form of optimal terminal wealth in two cases. Finally, we compare these two cases for the logarithmic utility, and analyze the influence of the `side information'.

Keywords��