FINANCIAL INFORMATICS

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. Contents: Preface About the Editors Beyond Hazard Rates: A New Framework for Credit-Risk Modelling (Dorje C Brody, Lane P Hughston and Andrea Macrina) Information-Based Asset Pricing (Dorje C Brody, Lane P Hughston and Andrea Macrina) Dam Rain and Cumulative Gain (Dorje C Brody, Lane P Hughston and Andrea Macrina) Informed Traders (Dorje C Brody, Mark H A Davis, Robyn L Friedman and Lane P Hughston) Information of Interest (Dorje C Brody and Robyn L Friedman) Credit Risk, Market Sentiment and Randomly-Timed Default (Dorje C Brody, Lane P Hughston and Andrea Macrina) Lévy Random Bridges and the Modelling of Financial Information (Edward Hoyle, Lane P Hughston and Andrea Macrina) Modelling Information Flows in Financial Markets (Dorje C Brody, Lane P Hughston and Andrea Macrina) Heat Kernel Interest Rate Models with Time-Inhomogeneous Markov Processes (Jirô Akahori and Andrea Macrina) Lévy Information and the Aggregation of Risk Aversion (Dorje C Brody and Lane P Hughston) Signal Processing with Lévy Information (Dorje C Brody, Lane P Hughston and Xun Yang) Heat Kernel Models for Asset Pricing (Andrea Macrina) Randomized Mixture Models for Pricing Kernels (Andrea Macrina and Priyanka A Parbhoo) Stochastic Modelling with Randomized Markov Bridges (Andrea Macrina and Jun Sekine) Modulated Information Flows in Financial Markets (Edward Hoyle, Andrea Macrina and Levent Ali Mengütürk) Pricing with Variance Gamma Information (Lane P Hughston and Leandro Sánchez-Betancourt) On the Pricing of Storable Commodities (Dorje C Brody, Lane P Hughston and Xun Yang) Mathematical Models for Fake News (Dorje C Brody and David M Meier) Readership: University academics and graduate students specialising in mathematical finance, financial mathematics, insurance, asset pricing, and financial engineering. Dorje Brody is Professor of Mathematics in the Department of Mathematics at the University of Surrey. He was born in Hong Kong, and later lived in Japan, obtaining a BSc at the University of Niigata. He took his PhD at Imperial College London. Dorje has been a visiting professor at Imperial College since 2011, and at St Petersburg National Research University of Information Technologies, Mechanics and Optics since 2013. Previously he has held a Royal Society University Research Fellowship at Imperial College, a Research Fellowship of the Particle Physics and Astronomy Research Council at Cambridge University, and a Junior Research Fellowship at Churchill College Cambridge. In 2004 he was selected as an Outstanding Young Person to meet the Emperor of Japan. Dorje is a member of the London Mathematical Society, a Fellow of the Institute of Physics, and a Lifetime Fellow of the Cambridge Philosophical Society. He works on a wide range of foundational problems in...