Related papers: Quantum diffusion of prices and profits
The limitations of the classical Black-Scholes model are examined by comparing calculated and actual historical prices of European call options on stocks from several sectors of the S&P 500. Persistent differences between the two prices…
We propose a generalization of the Bass diffusion model in discrete-time that explicitly models the effect of price in adoption. Our model is different from earlier price-incorporated models and fits well to adoption data for various…
This paper is an attempt at understanding the quantum-like dynamics of financial markets in terms of non-differentiable price-time continuum having fractal properties. The main steps of this development are the statistical scaling, the…
The quantum mechanical time-evolution is studied for a particle under the influence of an explicitly time-dependent rotating potential. We discuss the existence of the propagator and we show that in the limit of rapid rotation it converges…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
We investigate the behavior of stocks in daily price-limited stock markets by purposing a quantum spatial-periodic harmonic model. The stock price is presumed to oscillate and damp in a quantum spatial-periodic harmonic oscillator potential…
We introduce a variant of the Barndorff-Nielsen and Shephard stochastic volatility model where the non Gaussian Ornstein-Uhlenbeck process describes some measure of trading intensity like trading volume or number of trades instead of…
We pursue the quantum-mechanical challenge to the efficient market hypothesis for the stock market by employing the quantum Brownian motion model. We utilize the quantum Caldeira-Leggett master equation as a possible phenomenological model…
We study an agent-based stock market model with heterogeneous agents and friction. Our model is based on that of Foellmer-Schweizer(1993): The process of a stock price in a discrete-time framework is determined by temporary equilibria via…
Since Bachelier's thesis in 1900 (laying the foundation of the stochastic process, or Brownian motion, as a model of stock price changes), attempts at understanding the nature of prices and at predicting them have failed. Statistical…
In this paper, we propose a minimal model beyond geometric Brownian motion that aims to describe price actions with market inefficiency. From simple financial theory considerations, we arrive at a simple two-variable hidden Markovian time…
Executing even moderately large derivatives orders can be expensive and risky; it's hard to balance the uncertainty of working an order over time versus paying a liquidity premium for immediate execution. Here, we introduce the Time Is…
In this article we model a financial derivative price as an observable on the market state function. We apply geometric techniques to integrating the Heisenberg Equation of Motion. We illustrate how the non-commutative nature of the model…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
The quasi-Heisenberg picture of minisuperspace model is considered. The The quasi-Heisenberg picture of minisuperspace model is considered. The suggested scheme consists in quantizing of the equation of motion and interprets all observables…
Motivated by Heisenberg's observable-only stance, we replace latent "information" (filtrations, hidden diffusions, state variables) with observable transitions between price states. On a discrete price lattice with a Hilbert-space…
In this work we propose a option pricing model based on the Ornstein-Uhlenbeck process. It is a new look at the Black-Scholes formula which is based on the quantum game theory. We show the differences between a classical look which is price…
Beginning with several basic hypotheses of quantum mechanics, we give a new quantum model in econophysics. In this model, we define wave functions and operators of the stock market to establish the Schr\"odinger equation for the stock…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
We develop a general equilibrium model in which, at each instant, a short-run competitive equilibrium arises. Heterogeneity in factor allocation generates differential profit rates across sectors, prompting firms to move between them under…