Related papers: Path Integral and Asset Pricing
We demonstrate how path integrals often used in problems of theoretical physics can be adapted to provide a machinery for performing Bayesian inference in function spaces. Such inference comes about naturally in the study of inverse…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
Path integral method in quantum mechanics provides a new thinking for barrier option pricing. For proportional double-barrier step (PDBS) options, the option price changing process is analogous to a particle moving in a finite symmetric…
We apply path integration techniques to obtain option pricing with stochastic volatility using a generalized Black-Scholes equation known as the Merton and Garman equation. We numerically simulate the option prices using the technique of…
A path integral method, combined with atomistic spin dynamics simulations, has been developed to calculate thermal quantum expectation values using a classical approach. In this study, we show how to treat Hamiltonians with non-linear…
Non commutative quantum mechanics can be viewed as a quantum system represented in the space of Hilbert-Schmidt operators acting on non commutative configuration space. Taking this as departure point, we formulate a coherent state approach…
{}From Feynman's path integral, we derive quasi-classical quantization rules in supersymmetric quantum mechanics (SUSY-QM). First, we derive a SUSY counterpart of Gutzwiller's formula, from which we obtain the quantization rule of Comtet,…
Market illiquidity, feedback effects, presence of transaction costs, risk from unprotected portfolio and other nonlinear effects in PDE based option pricing models can be described by solutions to the generalized Black-Scholes parabolic…
In this talk we briefly review the concept of supersymmetric quantum mechanics using a model introduced by Witten. A quasi-classical path-integral evaluation for this model is performed, leading to a so-called supersymmetric quasi-classical…
This book provides an introduction to path integral methods and their application to modeling atomistic processes. The book covers both the foundational theory and recently developed simulation techniques. The text provides a self-contained…
We present a numerical path-integral iteration scheme for the low dimensional reduced density matrix of a time-dependent quantum dissipative system. Our approach simultaneously accounts for the combined action of a microscopically modelled…
The Constant Elasticity of Variance (CEV) model significantly outperforms the Black-Scholes (BS) model in forecasting both prices and options. Furthermore, the CEV model has a marked advantage in capturing basic empirical regularities such…
In this paper we derive semi-closed form prices of barrier (perhaps, time-dependent) options for the Hull-White model, ie., where the underlying follows a time-dependent OU process with a mean-reverting drift. Our approach is similar to…
We define a (semi-classical) path integral for gravity with Neumann boundary conditions in $D$ dimensions, and show how to relate this new partition function to the usual picture of Euclidean quantum gravity. We also write down the action…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We present two different approaches to stochastic integration in frictionless model free financial mathematics. The first one is in the spirit of It\^o's integral and based on a certain topology which is induced by the outer measure…
A geometric approach to general quantum statistical systems (including the harmonic oscillator) is presented. It is applied to Casimir energy and the dissipative system with friction. We regard the (N+1)-dimensional Euclidean {\it…
Discretizations of the Feynman-Kac path integral representation of the quantum mechanical density matrix are investigated. Each infinite-dimensional path integral is approximated by a Riemann integral over a finite-dimensional function…
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…
In this paper we analytically study the problem of pricing an arithmetically averaged Asian option in the path integral formalism. By a trick about the Dirac delta function, the measure of the path integral is defined by an effective action…