The Private Information Price of Risk
The Private Information Price of Risk (PIPR) represents the incremental price of risk assessed when private information becomes available. The PIPR plays a prominent role in models with private information. It determines the perception of risk for the recipient of a private information signal. It lies at the heart of the optimal consumption-portfolio policies of such an informed agent. It drives the return performance of an informed fund manager. It is an essential component of the welfare gains derived by investors in professionally managed funds.
KeywordsEntropy Covariance Volatility Librium Haas
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