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In the information-based approach to asset pricing the market filtration is modeled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market then determines the overall magnitude of asset volatility. By letting this information flow rate random, the authors obtain an elementary stochastic volatility model within the information-based approach. Such an extension is economically justified on account of the fact that in real markets information flow rates are rarely measurable.
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