Hoyle, E; Hughston, L P and Macrina, A. 2011. Lévy Random Bridges and the Modelling of Financial Information. Stochastic Processes and their Applications, 121(4), pp. 856-884. ISSN 0304-4149 [Article]

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Abstract or Description

The information-based asset-pricing framework of Brody–Hughston–Macrina (BHM) is extended to include a wider class of models for market information. To model the information flow, we introduce a class of processes called Lévy random bridges (LRBs), generalising the Brownian bridge and gamma bridge information processes of BHM. Given its terminal value at , an LRB has the law of a Lévy bridge. We consider an asset that generates a cash-flow at . The information about is modelled by an LRB with terminal value . The price process of the asset is worked out, along with the prices of options.

Item Type:	Article
Identification Number (DOI):	https://doi.org/10.1016/j.spa.2010.12.003
Keywords:	Lévy processes, Lévy bridges, Information-based asset pricing, Option pricing, Non-linear filtering theory
Departments, Centres and Research Units:	Computing
Dates:	Date Event 6 December 2010 Accepted 13 December 2010 Published Online April 2011 Published
Item ID:	31504
Date Deposited:	22 Feb 2022 13:25
Last Modified:	22 Feb 2022 13:25
Peer Reviewed:	Yes, this version has been peer-reviewed.
URI:	https://research.gold.ac.uk/id/eprint/31504

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