A Hamiltonian Approach to Barrier Option Pricing Under Vasicek Model
Pricing of Securities
2024-12-09 v3 Quantum Physics
Abstract
In this paper, we study option pricing under Vasicek Model by a Hamiltonian approach. Since the interest rate changes with time, we split the time to maturity into infinite steps, and the matrix element during each step could be calculated by quantum mechanics methods. Using completeness condition, the pricing kernel and the integral expression of option price could also be derived. Numerical results of option prices as functions of underlying asset price, floating rate and regression rate are also shown.
Cite
@article{arxiv.2307.07103,
title = {A Hamiltonian Approach to Barrier Option Pricing Under Vasicek Model},
author = {Chao Guo and Ning Yao},
journal= {arXiv preprint arXiv:2307.07103},
year = {2024}
}
Comments
22 pages,5 figures