Why do we need Kalman Filtering theory in dynamic models in finance when we consider an environment of asymmetric or incomplete information? I understand that this has to do with the update of the probabilities based on the beliefs that traders have wrt to the assets payoffs, however I can not understand how the mechanism works. I tried the Wikipedia explanation, but it confused me more. Does anybody know a simple way to understand the intuition of the mechanism of Kalman Filtering? Is there some book or some simple model that I can take a lOok also to understand it better?