Pricing Fixed-Income Securities in an Information-Based Framework

In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary economy. The nominal pricing kernel is at any given time assumed to be given by a function of the values of information processes at that time. By use of a change-of-measure technique we derive explicit expressions for the price processes of nominal discount bonds, and deduce the associated dynamics of the short rate of interest and the market price of risk. The interest rate positivity condition is expressed as a differential inequality. We proceed to the modelling of the price-level, which at any given time is also taken to be a function of the values of the information processes at that time. A simple model for a stochastic monetary economy is introduced in which the prices of nominal discount bonds and inflation-linked notes can be expressed in terms of aggregate consumption and the liquidity benefit generated by the money supply

Information, Inflation, and Interest

We propose a class of discrete-time stochastic models for the pricing of inflation-linked assets. The paper begins with an axiomatic scheme for asset pricing and interest rate theory in a discrete-time setting. The first axiom introduces a "risk-free" asset, and the second axiom determines the intertemporal pricing relations that hold for dividend-paying assets. The nominal and real pricing kernels, in terms of which the price index can be expressed, are then modelled by introducing a Sidrauski-type utility function depending on (a) the aggregate rate of consumption, and (b) the aggregate rate of real liquidity benefit conferred by the money supply. Consumption and money supply policies are chosen such that the expected joint utility obtained over a specified time horizon is maximised subject to a budget constraint that takes into account the "value" of the liquidity benefit associated with the money supply. For any choice of the bivariate utility function, the resulting model determines a relation between the rate of consumption, the price level, and the money supply. The model also produces explicit expressions for the real and nominal pricing kernels, and hence establishes a basis for the valuation of inflation-linked securities

Discrete-Time Interest Rate Modelling

This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing kernel be consistent with a pair of axioms, one giving the inter-temporal relations for dividend-paying assets, and the other ensuring the existence of a money-market asset. We show that the existence of a positive-return asset implies the existence of a previsible money-market account. A general expression for the price process of a limited-liability asset is derived. This expression includes two terms, one being the discounted risk-adjusted value of the dividend stream, the other characterising retained earnings. The vanishing of the latter is given by a transversality condition. We show (under the assumed axioms) that, in the case of a limited-liability asset with no permanently-retained earnings, the price process is given by the ratio of a pair of potentials. Explicit examples of discrete-time models are provided

A two-component model for fitting light-curves of core-collapse supernovae

We present an improved version of a light curve model, which is able to estimate the physical properties of different types of core-collapse supernovae having double-peaked light curves, in a quick and efficient way. The model is based on a two-component configuration consisting of a dense, inner region and an extended, low-mass envelope. Using this configuration, we estimate the initial parameters of the progenitor via fitting the shape of the quasi-bolometric light curves of 10 SNe, including Type IIP and IIb events, with model light curves. In each case we compare the fitting results with available hydrodynamic calculations, and also match the derived expansion velocities with the observed ones. Furthermore, we also compare our calculations with hydrodynamic models derived by the SNEC code, and examine the uncertainties of the estimated physical parameters caused by the assumption of constant opacity and the inaccurate knowledge of the moment of explosion

Goos-Haenchen and Imbert-Fedorov shifts of a nondiffracting Bessel beam

Goos-Haenchen and Imbert-Fedorov shifts are diffractive corrections to geometrical optics that have been extensively studied for a Gaussian beam that is reflected or transmitted by a dielectric interface. Propagating in free space before and after reflection or transmission, such a Gaussian beam spreads due to diffraction. We address here the question how the Goos-Haenchen and Imbert-Fedorov shifts behave for a ``nondiffracting'' Bessel beam.Comment: 3 pages, 1 figur