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Financial Informatics
An Information-Based Approach to Asset Pricing

Edited by
 

Dorje Brody (University of Surrey, UK)

Lane Hughston (Goldsmiths University of London, UK)

Andrea Macrina (University College London, UK)

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World Scientific

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Contents
 

  • Beyond Hazard Rates: A New Approach to Credit Risk Modelling

  • Information-Based Asset Pricing

  • Dam Rain and Cumulative Gain

  • Informed Traders

  • Credit Risk, Market Sentiment and Randomly-Timed Default

  • Information of Interest

  • Lévy Random Bridges and the Modelling of Financial Information

  • Modelling Information Flows in Financial Markets

  • Heat Kernel Interest Rate Models with Time-Inhomogeneous Markov Processes

  • Lévy Information and the Aggregation of Risk Aversion

  • Signal Processing with Lévy Information

  • Heat Kernel Models for Asset Pricing

  • Randomized Mixture Models for Pricing Kernels

  • Stochastic Modelling with Randomized Markov Bridges

  • Modulated Information Flows in Financial Markets

  • Pricing with Variance Gamma Information

  • On the Pricing of Storable Commodities

  • How to Model Fake News

The Brody-Hughston-Macrina approach to information-based asset pricing introduces a new way of looking at the mechanisms determining price movements in financial markets. The resulting theory of financial informatics is applicable across a wide range of asset classes and is distinguished by its emphasis on the explicit modelling of market information flows. In the BHM theory, each asset is defined by a collection of cash flows and each such cash flow is associated with a family of one or more so-called information processes that provide partial information about the cash flow. The theory is highly appealing on an intuitive basis: it is directly applicable to trading, investment and risk management—and yet at the same time leads to interesting mathematics. The present volume brings together a collection of 18 foundational papers of the subject by Brody, Hughston, and Macrina, many written in collaboration with various co-authors. There is a preface summarizing the current status of the theory, together with a brief history and bibliography of the subject. This book will be of great interest both to newcomers to financial mathematics as well as to established researchers in the subject.

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