In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market filtration is generated by a collection of information processes...

We consider a heat kernel approach for the development of stochastic pricing kernels. The kernels are constructed by positive propagators, which are driven by time-inhomogeneous Markov processes. We multiply such a propagator with a positive, time-dependent and decreasing weight function, and...

A heat kernel approach is proposed for the development of a general, flexible, and mathematically tractable asset pricing framework in finite time. The pricing kernel, giving rise to the price system in an incomplete market, is modelled by weighted heat kernels which are driven by multivariate...

Every maturity-dependent derivative contract entails a term structure. For example, when the value of the portfolio consisting of a long position in a stock and a short position in a vanilla option is expressed in units of its instantaneous exercise value, the resulting quantity defines a...

Bayes criteria are explicitly applied to statistical decision problems in simple quantum mechanical systems. The minimum Bayes cost is calculated for systems including polarised spins and relativistic spin 12 particles. The results suggest that, in decisions for a given ensemble of particles, on...

The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X that might be interpreted as the timing of future cash...

The theory of Lévy models for asset pricing simplifies considerably if one takes a pricing kernel approach, which enables one to bypass market incompleteness issues. The special case of a geometric Lévy model (GLM) with constant parameters can be regarded as a natural generalization of the...