Project Management

Information-Based Models For Finance And Insurance

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Executive Summary

In financial markets, the information that traders have about an asset is reflected in its price. The arrival of new information then leads to price changes. The 'Information-based framework' of Brody, Hughston and Macrina (BHM) isolates the emergence of information, and examines its role as a driver of price dynamics. This approach has led to the development of new models that capture a broad range of price behaviour. This paper extends the work of BHM by introducing a wider class of processes for the generation of the market filtration. In the BHM framework, each asset is associated with a collection of random cash flows.

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