Related papers: Quantum harmonic oscillator in option pricing
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
This work generalizes the subdiffusive Black-Scholes model by introducing the variable exponent in order to provide adequate descriptions for the option pricing, where the variable exponent may account for the variation of the memory…
An interacting Black-Scholes model for option pricing, where the usual constant interest rate r is replaced by a stochastic time dependent rate r(t) of the form r(t)=r+f(t) dW/dt, accounting for market imperfections and prices…
We derive an extremal fractional Gaussian by employing the L\'evy-Khintchine theorem and L\'evian noise. With the fractional Gaussian we then generalize the Black-Scholes-Merton option-pricing formula. We obtain an easily applicable and…
This paper focuses on the pricing of continuous geometric Asian options (GAOs) under a multifactor stochastic volatility model. The model considers fast and slow mean reverting factors of volatility, where slow volatility factor is…
In this paper we focus on the subdiffusive Black Scholes model. The main part of our work consists of the finite difference method as a numerical approach to the option pricing in the considered model. We derive the governing fractional…
We study the problem of estimating frequency response functions of systems of coupled, classical harmonic oscillators using a quantum computer. The functional form of these response functions can be mapped to a corresponding eigenproblem of…
The space of call price functions has a natural noncommutative semigroup structure with an involution. A basic example is the Black--Scholes call price surface, from which an interesting inequality for Black--Scholes implied volatility is…
In this work, we present a quantum algorithm designed to solve the differential equation used in the pricing of Asian options, in the framework of the Black-Scholes model. Our approach modifies an existing quantum pre-conditioning method…
We derive a closed-form solution for the price of an average price as well as an average strike geometric Asian option, by making use of the path integral formulation. Our results are compared to a numerical Monte Carlo simulation. We also…
We propose a new cognitive framework for option price modelling, using quantum neural computation formalism. Briefly, when we apply a classical nonlinear neural-network learning to a linear quantum Schr\"odinger equation, as a result we get…
The accurate valuation of financial derivatives plays a pivotal role in the finance industry. Although closed formulas for pricing are available for certain models and option types, exemplified by the European Call and Put options in the…
Courses on undergraduate quantum mechanics usually focus on solutions of the Schr\"odinger equation for several simple one-dimensional examples. When the notion of a Hilbert space is introduced only academic examples are used, such as the…
We examine various generalizations, e.g. exactly solvable, quasi-exactly solvable and non-Hermitian variants, of a quantum nonlinear oscillator. For all these cases, the same mass function has been used and it has also been shown that the…
The Schrodinger equation describes how quantum states evolve according to the Hamiltonian of the system. For physical systems, we have it that the Hamiltonian must be a Hermitian operator to ensure unitary dynamics. For anti-Hermitian…
We deal with some generalizations on a Black--Scholes model arising in financial mathematics. As novelty in this paper, we consider a variable volatility and abstract functional boundary conditions, which allow us to treat a very large…
The Black-Scholes Option pricing model (BSOPM) has long been in use for valuation of equity options to find the prices of stocks. In this work, using BSOPM, we have come up with a comparative analytical approach and numerical technique to…
We consider a particular discretization of the harmonic oscillator which admits an orthogonal basis of eigenfunctions called Kravchuk functions possessing appealing properties from the numerical point of view. We analytically prove the…
his paper presents finite element methods for solving numerically the Risk-Adjusted Pricing Methodology (RAPM) Black-Scholes model for option pricing with transaction costs. Spatial finite element models based on P1 and/or P2 elements are…
The purpose of this paper is to analyze the problem of option pricing when the short rate follows subdiffusive fractional Merton model. We incorporate the stochastic nature of the short rate in our option valuation model and derive explicit…