A monetary value for initial information in portfolio optimization

Abstract.

We consider an investor maximizing his expected utility from terminal wealth with portfolio decisions based on the available information flow. This investor faces the opportunity to acquire some additional initial information ${\cal G}$. His subjective fair value of this information is defined as the amount of money that he can pay for ${\cal G}$ such that this cost is balanced out by the informational advantage in terms of maximal expected utility. We study this value for common utility functions in the setting of a complete market modeled by general semimartingales. The main tools are a martingale preserving change of measure and martingale representation results for initially enlarged filtrations.