Information-Based Model with Noisy Anticipation and Its Application in Finance

Kirati Thoednithi ()
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Kirati Thoednithi: Osaka University

Asia-Pacific Financial Markets, 2018, vol. 25, issue 3, No 1, 159-177

Abstract: Abstract We focus on an information-based model with noisy anticipation motivated by asset valuation problem. Precisely, the price of an asset is computed from the expectation of the totality of discounted future dividend, conditioned on the market filtration generated by (1) the current and past value of dividend, and (2) a partial information of the future cash flow stream. As a result, we obtained a new solution method to compute a generalized asset pricing formula. Moreover, under a certain condition, the formula can be reduced to a simple form, a linear combination between dividend and noisy anticipation. The approach can be applied to approximate a reasonable price of the commodities even without knowing the actual demand and supply.

Keywords: Information-based pricing model; Commodity pricing; Multidimensional asset pricing; Convenience yield; Markov process (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10690-018-9243-8

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