Related papers: Quantum harmonic oscillator in option pricing
In this note, Black--Scholes implied volatility is expressed in terms of various optimisation problems. From these representations, upper and lower bounds are derived which hold uniformly across moneyness and call price. Various symmetries…
The paper focuses on pricing European-style options on several underlying assets under the Black-Scholes model represented by a nonstationary partial differential equation. The proposed method combines the Galerkin method with…
The Hamiltonian of the harmonic oscillator is usually defined as a differential operator, but an integral representation can be obtained by using the coherent state quantization. The finite frame quantization is a finite counterpart of the…
This study enhances option pricing by presenting unique pricing model fractional order Black-Scholes-Merton (FOBSM) which is based on the Black-Scholes-Merton (BSM) model. The main goal is to improve the precision and authenticity of option…
A new model for the finite one-dimensional harmonic oscillator is proposed based upon the algebra u(2)_{\alpha}. This algebra is a deformation of the Lie algebra u(2) extended by a parity operator, with deformation parameter {\alpha}. A…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
In the framework of Black-Scholes-Merton model of financial derivatives, a path integral approach to option pricing is presented. A general formula to price European path dependent options on multidimensional assets is obtained and…
Two novel and direct quantum mechanical representations of the Black-Scholes model are constructed based on the (Wick-rotated) quantization of two specific mechanical systems. The quantum setup is achieved by means of the associated…
We consider closed-form approximations for European put option prices within the Heston and GARCH diffusion stochastic volatility models with time-dependent parameters. Our methodology involves writing the put option price as an expectation…
We consider a model of linear market impact, and address the problem of replicating a contingent claim in this framework. We derive a non-linear Black-Scholes Equation that provides an exact replication strategy. This equation is fully…
The finite q-oscillator is a model that obeys the dynamics of the harmonic oscillator, with the operators of position, momentum and Hamiltonian being functions of elements of the q-algebra su_q(2). The spectrum of position in this discrete…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
Adaptive wave model for financial option pricing is proposed, as a high-complexity alternative to the standard Black--Scholes model. The new option-pricing model, representing a controlled Brownian motion, includes two wave-type approaches:…
We compare the option pricing formulas of Louis Bachelier and Black-Merton-Scholes and observe -- theoretically as well as for Bachelier's original data -- that the prices coincide very well. We illustrate Louis Bachelier's efforts to…
This paper investigates analytic properties of American option prices under the finite moment log-stable (FMLS) model. Under this model the price of American options is characterised by the free boundary problem of a fractional partial…
An explicit solution of the equation for the classical harmonic oscillator with smooth switching of the frequency has been found . A detailed analysis of a quantum harmonic oscillator with such frequency has been done on the base of the…
One of the most discussed problems in the financial world is stock option pricing. The Black-Scholes Equation is a Parabolic Partial Differential Equation which provides an option pricing model. The present work proposes an approach based…
We propose a numerical procedure for computing the prices of European options, in which the underlying asset price is a Markovian strict local martingale. If the underlying process is a strict local martingale and the payoff is of linear…
In this paper, we present an implicit finite difference method for the numerical solution of the Black-Scholes model of American put options without dividend payments. We combine the proposed numerical method by using a front fixing…
In this paper a quantum mechanics is built by means of a non-Hermitian momentum operator. We have shown that it is possible to construct two Hermitian and two non-Hermitian type of Hamiltonians using this momentum operator. We can construct…