This paper considers multiple market agents who have distinct distributional opinions about the state price density. We first determine the optimal trading positions of a utility maximizing market taker who trades Arrow-Debreu securities for prices set by the market maker. We use calculus of...

This paper presents a novel approach to portfolio optimization based on perceived mean reversion in certain driftless markets, such as the foreign exchange spot market. This approach relies upon the likelihood ratio between the perceived and realized price distribution densities of the asset...