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Quantum Mechanics, Path Integrals and Option Pricing: Reducing the Complexity of Finance

Author

Listed:
  • Belal E. Baaquie
  • Claudio Coriano
  • Marakani Srikant

Abstract

Quantum Finance represents the synthesis of the techniques of quantum theory (quantum mechanics and quantum field theory) to theoretical and applied finance. After a brief overview of the connection between these fields, we illustrate some of the methods of lattice simulations of path integrals for the pricing of options. The ideas are sketched out for simple models, such as the Black-Scholes model, where analytical and numerical results are compared. Application of the method to nonlinear systems is also briefly overviewed. More general models, for exotic or path-dependent options are discussed.

Suggested Citation

  • Belal E. Baaquie & Claudio Coriano & Marakani Srikant, 2002. "Quantum Mechanics, Path Integrals and Option Pricing: Reducing the Complexity of Finance," Papers cond-mat/0208191, arXiv.org, revised Aug 2002.
    • Handle: RePEc:arx:papers:cond-mat/0208191
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    Cited by:

    1. L. Ingber, 2018. "Quantum path integral for financial options," Lester Ingber Papers 18qp, Lester Ingber.
    2. L. Ingber, 2018. "Quantum Variables in Finance and Neuroscience," Lester Ingber Papers 18qv, Lester Ingber.
    3. L. Ingber, 2017. "Evolution of regenerative Ca-ion wave-packet in neuronal-firing fields: Quantum path-integral with serial shocks," Lester Ingber Papers 17qp, Lester Ingber.
    4. L. Ingber, 2016. "Path-integral quantum PATHTREE and PATHINT algorithms," Lester Ingber Papers 16pi, Lester Ingber.
    5. L. Ingber, 2017. "Quantum Path-Integral qPATHINT Algorithm," Lester Ingber Papers 17qa, Lester Ingber.
    6. L. Ingber, 2017. "Options on quantum money: Quantum path-integral with serial shocks," Lester Ingber Papers 17oq, Lester Ingber.
    7. A. Jakovac, 2020. "Finance from the viewpoint of physics," Papers 2001.09446, arXiv.org, revised Jan 2020.
    8. L. Ingber, 2021. "Hybrid classical-quantum computing: Applications to statistical mechanics of financial markets," Lester Ingber Papers 21cq, Lester Ingber.
    9. L. Ingber, 2020. "Revisiting Our Quantum World," Lester Ingber Papers 20rq, Lester Ingber.

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