Financial Informatics:An Information-Based Approach to Asset Pricing

Edited by Dorje Brody, Lane Hughston and Andrea Macrina

in World Scientific Books from World Scientific Publishing Co. Pte. Ltd.

Abstract: 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.

Keywords: Financial Mathematics; Mathematical Finance; Financial Markets; Informatics; Asset Pricing; Asset Price Dynamics; Stochastic Modelling; Information Process; Information Flow; Signal Processing; Filtration; Brownian Motion; Brownian Bridge; Change of Measure; Stochastic Volatility; Credit Risk; Default; Equities; Bonds; Collateralized Debt Obligation; Discount Bond; Lévy Process; Lévy Random Bridge; Lévy Information; Gamma Bridge; Markov Bridge; Pricing Kernel; Option Pricing; Informed Traders; Insurance; Reinsurance; Insurance Claims; Bond Portfolio; Heat Kernel; Markov Process; Variance Gamma Process; Ornstein-Uhlenbeck Process; Commodities; Fake News (search for similar items in EconPapers)
JEL-codes: C02 C6 G12 (search for similar items in EconPapers)
Date: 2022
ISBN: 9789811246487
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https://www.worldscientific.com/worldscibooks/10.1142/12533 (text/html)
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Chapters in this book:

Ch 1 Beyond Hazard Rates: A New Framework for Credit-Risk Modelling , pp 1-27

Dorje C. Brody, Lane P. Hughston and Andrea Macrina

Ch 2 INFORMATION-BASED ASSET PRICING , pp 29-64

Dorje C. Brody, Lane P. Hughston and Andrea Macrina

Ch 3 Dam rain and cumulative gain , pp 65-86

Dorje C. Brody, Lane P. Hughston and Andrea Macrina

Ch 4 Informed traders , pp 87-106

Dorje C. Brody, Mark H. A. Davis, Robyn L. Friedman and Lane P. Hughston

Ch 5 Information of interest , pp 107-112

Dorje Brody and Robyn Friedman

Ch 6 Credit Risk, Market Sentiment and Randomly-Timed Default , pp 113-126

Dorje C. Brody, Lane P. Hughston and Andrea Macrina

Ch 7 Lévy random bridges and the modelling of financial information , pp 127-155

Edward Hoylea, Lane P. Hughston and Andrea Macrina

Ch 8 Modelling Information Flows in Financial Markets , pp 157-177

Dorje C. Brody, Lane P. Hughston and Andrea Macrina

Ch 9 HEAT KERNEL INTEREST RATE MODELS WITH TIME-INHOMOGENEOUS MARKOV PROCESSES , pp 179-193

Jiro Akahori and Andrea Macrina

Ch 10 Lévy information and the aggregation of risk aversion , pp 195-213

Dorje C. Brody and Lane P. Hughston

Ch 11 Signal processing with Lévy information , pp 215-236

Dorje C. Brody, Lane P. Hughston and Xun Yang

Ch 12 HEAT KERNEL MODELS FOR ASSET PRICING , pp 237-270

Andrea Macrina

Ch 13 Randomised Mixture Models for Pricing Kernels , pp 271-305

Andrea Macrina and Priyanka A. Parbhoo

Ch 14 Stochastic modelling with randomized Markov bridges , pp 307-333

Andrea Macrina and Jun Sekine

Ch 15 MODULATED INFORMATION FLOWS IN FINANCIAL MARKETS , pp 335-369

Edward Hoyle, Andrea Macrina and Levent Ali Menguturk

Ch 16 Pricing with Variance Gamma Information , pp 371-392

Lane P. Hughston and Leandro Sánchez-Betancourt

Ch 17 On the Pricing of Storable Commodities , pp 393-404

Dorje C. Brody, Lane P. Hughston and Xun Yang

Ch 18 Mathematical Models for Fake News , pp 405-423

Dorje C. Brody and David M. Meier

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