Related papers: Quantum harmonic oscillator in option pricing
The classical dynamical system possessing a quantum spectrum of energy and "quantum" behavior is suggested and investigated. The proposed model can be considered as a dynamical variant of the old quantum theory for harmonic oscillator in…
In this paper, we focus on the tempered 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…
In a global derivatives market with notional values in the hundreds of trillions of dollars, the accuracy and efficiency of pricing models are of fundamental importance, with direct implications for risk management, capital allocation, and…
We fit the volatility fluctuations of the S&P 500 index well by a Chi distribution, and the distribution of log-returns by a corresponding superposition of Gaussian distributions. The Fourier transform of this is, remarkably, of the Tsallis…
The studied model was suggested to design a perfect hedging strategy for a large trader. In this case the implementation of a hedging strategy affects the price of the underlying security. The feedback-effect leads to a nonlinear version of…
In this work, we describe certain pseudo-Hermitian extensions of the harmonic and isotonic oscillators, both of which are exactly-solvable models in quantum mechanics. By coupling the dynamics of a particle moving in a one-dimensional…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
The problem of quantile hedging for basket derivatives in the Black-Scholes model with correlation is considered. Explicit formulas for the probability maximizing function and the cost reduction function are derived. Applicability of the…
The harmonic oscillator is one of the most studied systems in Physics with a myriad of applications. One of the first problems solved in a Quantum Mechanics course is calculating the energy spectrum of the simple harmonic oscillator with…
In this paper, we present a reduced basis method for pricing European and American options based on the Black-Scholes and Heston model. To tackle each model numerically, we formulate the problem in terms of a time dependent variational…
In this paper we propose a closed-form approximation for the price of basket options under a multivariate Black-Scholes model, based on Taylor expansions and the calculation of mixed exponential-power moments of a Gaussian distribution. Our…
We give an exposition and numerical studies of upper hedging prices in multinomial models from the viewpoint of linear programming and the game-theoretic probability of Shafer and Vovk. We also show that, as the number of rounds goes to…
We present a method which allows to deform extremal black hole solutions into non-extremal solutions, for a large class of supersymmetric and non-supersymmetric Einstein-Vector-Scalar type theories. The deformation is shown to be largely…
Usually, in the Black-Scholes pricing theory the volatility is a positive real parameter. Here we explore what happens if it is allowed to be a complex number. The function for pricing a European option with a complex volatility has…
It is well-known that the Black-Scholes formula has been derived under the assumption of constant volatility in stocks. In spite of evidence that this parameter is not constant, this formula is widely used by financial markets. This paper…
This paper presents a multinomial method for option pricing when the underlying asset follows an exponential Variance Gamma process. The continuous time Variance Gamma process is approximated by a discrete time Markov chain with the same…
Differential equations can be used to construct predictive models of a diverse set of real-world phenomena like heat transfer, predator-prey interactions, and missile tracking. In our work, we explore one particular application of…
A nonlinear model of the quantum harmonic oscillator on two-dimensional spaces of constant curvature is exactly solved. This model depends of a parameter $\la$ that is related with the curvature of the space. Firstly the relation with other…
We write a computer program that uses the recursion relation to calculate wave function in the harmonic-oscillator potential for specified values of E/hv (with its deviation 0.001) containing only even numbers of v (0,2,4,...). In this…
We analyze and calculate the early exercise boundary for a class of stationary generalized Black-Scholes equations in which the volatility function depends on the second derivative of the option price itself. A motivation for studying the…