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Quantum Mechanics, Path Integrals and Option Pricing: Reducing the Complexity of Finance

Belal E. Baaquie·Claudio Coriano·Marakani Srikant
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Abstract

Quantum Finance represents the synthesis of the techniques of quantum theory (quantum mechanics and quantum field theory) to theoretical and applied finance. After a brief overview of the connection between these fields, we illustrate some of the methods of lattice simulations of path integrals for the pricing of options. The ideas are sketched out for simple models, such as the Black-Scholes model, where analytical and numerical results are compared. Application of the method to nonlinear systems is also briefly overviewed. More general models, for exotic or path-dependent options are discussed.

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Belal E. Baaquie, Claudio Coriano, Marakani Srikant. 2002-08-11. Quantum Mechanics, Path Integrals and Option Pricing: Reducing the Complexity of Finance. https://doi.org/10.1142/9789812704467_0046

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