QUANTILE HEDGING FOR AN INSIDER
PrzemysŁaw Klusik
Zbigniew Palmowski
Jakub Zwierz
Abstract: In this paper we consider the problem of the quantile hedging from the point of view of
a better informed agent acting on the market. The additional knowledge of the agent is
modelled by a filtration initially enlarged by some random variable. By using equivalent
martingale measures introduced in [1] and [2] we solve the problem for the complete case, by
extending the results obtained in [4] to the insider context. Finally, we consider the
examples with the explicit calculations within the standard Black–Scholes model.
2000 AMS Mathematics Subject Classification: Primary: 60H30; Secondary:
60G44.
Keywords and phrases: Insider trading, quantile hedging, initial enlargement of
filtrations, equivalent martingale measure.