Why is it important to study various sources of information?

In this talk, we shall give some examples, based on Enlargement of filtration theory, to see how some extra information can be used to make profit, or even arbitrages and how prices can be changed in an incomplete market. This... [ view full abstract ]

In this talk, we shall give some examples, based on Enlargement of filtration theory, to see how some extra information can be used to make profit, or even arbitrages and how prices can be changed in an incomplete market. This problem of arbitrages occurring from extra information is well known as insider trading and has been studied by several authors, among them Kchia and Protter and Draouil and Øksendal (with Malliavin calculus techniques). We shall recall some general facts about information drift and pay attention to progressive enlargement and give necessary and sufficient conditions so that No Arbitrages can occur, based on papers with Aksamit, Choulli and Deng. We will also present a case, based on a paper with Coculescu, where prices of a given payoff are computed in different filtrations and give a condition so that, under short selling constraints there are no arbitrages.