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PT Symmetry, Non-Gaussian Path Integrals, and the Quantum Black-Scholes Equation

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  • Will Hicks

Abstract

The Accardi-Boukas quantum Black-Scholes framework, provides a means by which one can apply the Hudson-Parthasarathy quantum stochastic calculus to problems in finance. Solutions to these equations can be modelled using nonlocal diffusion processes, via a Kramers-Moyal expansion, and this provides useful tools to understand their behaviour. In this paper we develop further links between quantum stochastic processes, and nonlocal diffusions, by inverting the question, and showing how certain nonlocal diffusions can be written as quantum stochastic processes. We then go on to show how one can use path integral formalism, and PT symmetric quantum mechanics, to build a non-Gaussian kernel function for the Accardi-Boukas quantum Black-Scholes. Behaviours observed in the real market are a natural model output, rather than something that must be deliberately included.

Suggested Citation

  • Will Hicks, 2018. "PT Symmetry, Non-Gaussian Path Integrals, and the Quantum Black-Scholes Equation," Papers 1812.00839, arXiv.org, revised Jan 2019.
    • Handle: RePEc:arx:papers:1812.00839
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    References listed on IDEAS

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    1. Haven, Emmanuel, 2003. "A Black-Scholes Schrödinger option price: ‘bit’ versus ‘qubit’," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 201-206.
    2. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-343.
    3. Nielsen, Lars Tyge, 1999. "Pricing and Hedging of Derivative Securities," OUP Catalogue, Oxford University Press, number 9780198776192.
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    Cited by:

    1. Will Hicks, 2019. "Closed Quantum Black-Scholes: Quantum Drift and the Heisenberg Equation of Motion," Papers 1911.11475, arXiv.org, revised Jan 2020.
    2. Anantya Bhatnagar & Dimitri D. Vvedensky, 2022. "Quantum effects in an expanded Black–Scholes model," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 95(8), pages 1-12, August.
    3. Din Prathumwan & Kamonchat Trachoo, 2019. "Application of the Laplace Homotopy Perturbation Method to the Black–Scholes Model Based on a European Put Option with Two Assets," Mathematics, MDPI, vol. 7(4), pages 1-11, March.
    4. Will Hicks, 2020. "Pseudo-Hermiticity, Martingale Processes and Non-Arbitrage Pricing," Papers 2009.00360, arXiv.org, revised Apr 2021.
    5. Will Hicks, 2023. "Modelling Illiquid Stocks Using Quantum Stochastic Calculus," Papers 2302.05243, arXiv.org.

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