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Quantum Theory for the Binomial Model in Finance Theory

Quantum Physics 2019-06-28 v6

Abstract

In this paper, a quantum model for the binomial market in finance is proposed. We show that its risk-neutral world exhibits an intriguing structure as a disk in the unit ball of R3,{\bf R}^3, whose radius is a function of the risk-free interest rate with two thresholds which prevent arbitrage opportunities from this quantum market. Furthermore, from the quantum mechanical point of view we re-deduce the Cox-Ross-Rubinstein binomial option pricing formula by considering Maxwell-Boltzmann statistics of the system of NN distinguishable particles.

Keywords

Cite

@article{arxiv.quant-ph/0112156,
  title  = {Quantum Theory for the Binomial Model in Finance Theory},
  author = {Zeqian Chen},
  journal= {arXiv preprint arXiv:quant-ph/0112156},
  year   = {2019}
}

Comments

Latex, 8 pages,1 figure, revised version,submitted