Related papers: Modelling Information Flows in Financial Markets
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
In financial markets, the information that traders have about an asset is reflected in its price. The arrival of new information then leads to price changes. The `information-based framework' of Brody, Hughston and Macrina (BHM) isolates…
In the information-based pricing framework of Brody, Hughston and Macrina, the market filtration $\{ \mathcal F_t\}_{t\geq 0}$ is generated by an information process $\{ \xi_t\}_{t\geq0}$ defined in such a way that at some fixed time $T$ an…
We model continuous-time information flows generated by a number of information sources that switch on and off at random times. By modulating a multi-dimensional L\'evy random bridge over a random point field, our framework relates the…
The information-based asset-pricing framework of Brody, Hughston and Macrina (BHM) is extended to include a wider class of models for market information. In the BHM framework, each asset is associated with a collection of random cash flows.…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
An asymmetric information model is introduced for the situation in which there is a small agent who is more susceptible to the flow of information in the market than the general market participant, and who tries to implement strategies…
We consider a pair of traders in a market where the information available to the second trader is a strict subset of the information available to the first trader. The traders make prices based on the information available concerning a…
The main purpose of this paper is to extend the information-based asset-pricing framework of Brody-Hughston-Macrina to a more general set-up. We include a wider class of models for market information and in contrast to the original paper,…
Data assets are data commodities that have been processed, produced, priced, and traded based on actual demand. Reasonable pricing mechanism for data assets is essential for developing the data market and realizing their value. Most…
We characterise the solutions to a continuous-time optimal liquidity provision problem in a market populated by informed and uninformed traders. In our model, the asset price exhibits fads -- these are short-term deviations from the…
Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…
We extend the information-based asset-pricing framework by Brody, Hughston \& Macrina to incorporate a stochastic bankruptcy time for the writer of the asset. Our model introduces a non-defaultable cash flow $Z_T$ to be made at time $T$,…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary…
The Black-Litterman model is a framework for incorporating forward-looking expert views in a portfolio optimization problem. Existing work focuses almost exclusively on single-period problems with the forecast horizon matching that of the…
At the ultra high frequency level, the notion of price of an asset is very ambiguous. Indeed, many different prices can be defined (last traded price, best bid price, mid price,...). Thus, in practice, market participants face the problem…