Subscribe to the gold package and get unlimited access to Shamra Academy
Register a new userOptimal insider control and semimartingale decompositions under enlargement of filtration
101
0
0.0
(
0
)
Ask ChatGPT about the research
No Arabic abstract
We combine stochastic control methods, white noise analysis and Hida-Malliavin calculus applied to the Donsker delta functional to obtain new representations of semimartingale decompositions under enlargement of filtrations. The results are illustrated by explicit examples.
rate research
Read More
We study the problem of optimal inside control of an SPDE (a stochastic evolution equation) driven by a Brownian motion and a Poisson random measure. Our optimal control problem is new in two ways: (i) The controller has access to inside information, i.e. access to information about a future state of the system, (ii) The integro-differential operator of the SPDE might depend on the control. In the first part of the paper, we formulate a sufficient and a necessary maximum principle for this type of control problem, in two cases: (1) When the control is allowed to depend both on time t and on the space variable x. (2) When the control is not allowed to depend on x. In the second part of the paper, we apply the results above to the problem of optimal control of an SDE system when the inside controller has only noisy observations of the state of the system. Using results from nonlinear filtering, we transform this noisy observation SDE inside control problem into a full observation SPDE insider control problem. The results are illustrated by explicit examples.
We study emph{optimal insider control problems}, i.e. optimal control problems of stochastic systems where the controller at any time $t$ in addition to knowledge about the history of the system up to this time, also has additional information related to a emph{future} value of the system. Since this puts the associated controlled systems outside the context of semimartingales, we apply anticipative white noise analysis, including forward integration and Hida-Malliavin calculus to study the problem. Combining this with Donsker delta functionals we transform the insider control problem into a classical (but parametrised) adapted control system, albeit with a non-classical performance functional. We establish a sufficient and a necessary maximum principle for such systems. Then we apply the results to obtain explicit solutions for some optimal insider portfolio problems in financial markets described by It^ o-L evy processes. Finally, in the Appendix we give a brief survey of the concepts and results we need from the theory of white noise, forward integrals and Hida-Malliavin calculus.
In a general semimartingale financial model, we study the stability of the No Arbitrage of the First Kind (NA1) (or, equivalently, No Unbounded Profit with Bounded Risk) condition under initial and under progressive filtration enlargements. In both cases, we provide a simple and general condition which is sufficient to ensure this stability for any fixed semimartingale model. Furthermore, we give a characterisation of the NA1 stability for all semimartingale models.
This paper describes an optimization framework to control a distributed parameter system (DPS) using a team of mobile actuators. The framework simultaneously seeks optimal control of the DPS and optimal guidance of the mobile actuators such that a cost function associated with both the DPS and the mobile actuators is minimized subject to the dynamics of each. The cost incurred from controlling the DPS is linear-quadratic, which is transformed into an equivalent form as a quadratic term associated with an operator-valued Riccati equation. This equivalent form reduces the problem to seeking for guidance only because the optimal control can be recovered once the optimal guidance is obtained. We establish conditions for the existence of a solution to the proposed problem. Since computing an optimal solution requires approximation, we also establish the conditions for convergence to the exact optimal solution of the approximate optimal solution. That is, when evaluating these two solutions by the original cost function, the difference becomes arbitrarily small as the approximation gets finer. Two numerical examples demonstrate the performance of the optimal control and guidance obtained from the proposed approach.
In this paper, the Kyle model of insider trading is extended by characterizing the trading volume with long memory and allowing the noise trading volatility to follow a general stochastic process. Under this newly revised model, the equilibrium conditions are determined, with which the optimal insider trading strategy, price impact and price volatility are obtained explicitly. The volatility of the price volatility appears excessive, which is a result of the fact that a more aggressive trading strategy is chosen by the insider when uninformed volume is higher. The optimal trading strategy turns out to possess the property of long memory, and the price impact is also affected by the fractional noise.
Log in to be able to interact and post comments
comments
Fetching comments
Sign in to be able to follow your search criteria
