Viable insider markets

Abstract

We consider the problem of optimal inside portfolio π(t) in a financial market with a corresponding wealth process X(t) = X π (t) modelled byThis gives rise to a progressive inside information flow H. It is not clear if B(·) is a semimartingale under this filtration. However, using forward integrals, Hida-Malliavin calculus and Donsker delta functionals we show that ifthen the insider market is not viable. This extends a result in [PK], where it is proved that if the insider knows the value of B(T ) already from time 0 (corresponding to ε t = T − t for all t), then the market is not viable.