  In the information-based approach to asset pricing the market filtration is
modelled explicitly as a superposition of signals concerning relevant market
factors and independent noise. The rate at which the signal is revealed to the
market then determines the overall magnitude of asset volatility. By letting
this information flow rate random, we obtain an elementary stochastic
volatility model within the information-based approach. Such an extension is
economically justified on account of the fact that in real markets information
flow rates are rarely measurable. Effects of having a random information flow
rate is investigated in detail in the context of a simple model setup.
Specifically, the price process of the asset is derived, and its characteristic
behaviours are revealed via simulation studies. The price of a European-style
option is worked out, showing that the model has a sufficient flexibility to
fit volatility surface. As an extension of the random information flow model,
price manipulation is considered. A simple model is used to show how the
skewness of the manipulated and unmanipulated price processes take opposite
signature.
