Information Geometry and its Applications III

Abstract Dorje Brody

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Dorje Brody  (Imperial College London, United Kingdom)
Monday, August 02, 2010, room Hörsaal 1
Information, interest rates, and geometry

The characterisation of interest-rate dynamics requires the understanding of the interest-rate term structure (dependencies of the bond price on different maturities). As such, interest-rate modelling amounts to the modelling of the random dynamics of a smooth curve, known as the ``yield curve''. A priori there is no structure on the space of yield curves to allow for an elegant mathematical characterisation, but it turns out that there is a remarkable correspondence between an yield curve and a probability density function. The dynamics of interest-rate term structure can then be represented as a measure-valued process, and the latter allows for the powerful method of information geometry to identify useful quantities like the separation of two interest rate markets. One can, furthermore, ask where does the random dynamics of interest rates emerge from? This is given by the flow of information in financial markets concerning various economic factors such as the liquidity risk. The dynamics of the term-structure density function can then be seen as the result of an optimum filter, calculated by the market. We can therefore model the flow of information explicitly and derive interest rate dynamics, seen as an emergent phenomena.

[1] Brody, D.C. & Hughston, L.P. (2001) Interest rates and information geometry. Proceedings of the Royal Society London A457, 1343-1364.

[2] Brody, D.C. & Friedman, R.L. (2009) Information of interest. Risk Magazine, December, 105-110 (reprinted in: Life & Pensions, February 2010, 35-40).

Date and Location

August 02 - 06, 2010
University of Leipzig
Augustusplatz
04103 Leipzig
Germany

Scientific Organizers

Nihat Ay
Max Planck Institute for Mathematics in the Sciences
Information Theory of Cognitive Systems Group
Germany
Contact by Email

Paolo Gibilisco
Università degli Studi di Roma "Tor Vergata"
Facoltà di Economia
Italy
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František Matúš
Academy of Sciences of the Czech Republic
Institute of Information Theory and Automation
Czech Republic
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Scientific Committee

Shun-ichi Amari
RIKEN
Brain Science Institute, Mathematical Neuroscience Laboratory
Japan
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Imre Csiszár
Hungarian Academy of Sciences
Alfréd Rényi Institute of Mathematics
Hungary
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Dénes Petz
Budapest University of Technology and Economics
Department for Mathematical Analysis
Hungary
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Giovanni Pistone
Collegio Carlo Alberto, Moncalieri
Italy
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Administrative Contact

Antje Vandenberg
Max Planck Institute for Mathematics in the Sciences
Contact by Email
Phone: (++49)-(0)341-9959-552
Fax: (++49)-(0)341-9959-555

05.04.2017, 12:42