The financial value of knowing the distribution of stock prices in discrete market models. (English) Zbl 1431.91374

Much of the research into the financial value of information has been in a continuous context. This article explores the topic in a discrete setting. The authors consider the expected utility rather than expected wealth. They concentrate on three different utility functions: log, power, and exponential functions.
A definition of the financial value of weak information is provided in terms of expected utility. Assuming a complete market, an expression for this measure is given as the main result of the article. The methodology is then exemplified in a binomial model of two assets.


91G15 Financial markets
91G10 Portfolio theory
91B16 Utility theory
Full Text: DOI arXiv


[1] 10.1007/978-3-540-44859-4_2
[2] 10.1007/s00780-003-0116-1 · Zbl 1064.60082
[3] 10.1016/0304-4068(89)90018-9 · Zbl 0675.90012
[4] 10.1137/0329039 · Zbl 0733.93085
[5] 10.1007/s11166-005-5102-x · Zbl 1125.91315
[6] 10.1214/105051605000000089 · Zbl 1137.93423
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.