The value of information for optimal portfolio management

Abstract

We study the value of information for a manager who invests in a stock market to optimize the utility of her future wealth. We consider an incomplete financial market model with a mean reverting market price of risk that cannot be directly observed by the manager. The available information is represented by the filtration generated by the stock price process. We solve the classical Merton problem for an incomplete market under partial information by means of filtering techniques and the martingale approach.