arXiv subjects
Publications and source records attributed to Lane P. Hughston.
The dynamical equation satisfied by the density matrix, when a quantum system is subjected to one or more constraints arising from conserved quantities, is derived. The resulting nonlinear motion of the density matrix has the property that the evolution is independent of the specific composition of the pure-state mixture generating the initial state of the system.
A new framework for deriving equations of motion for constrained quantum systems is introduced, and a procedure for its implementation is outlined. In special cases the framework reduces to a quantum analogue of the Dirac theory of constrains in classical mechanics. Explicit examples involving spin-1/2 particles are worked out in detail: in one example our approach coincides with a quantum version of the Dirac formalism, while the other example illustrates how a situation that cannot be treated by Dirac's approach can nevertheless be dealt with in the present scheme.
An asymmetric information model is introduced for the situation in which there is a small agent who is more susceptible to the flow of information in the market than the general market participant, and who tries to implement strategies based on the additional information. In this model market participants have access to a stream of noisy information concerning the future return of an asset, whereas the informed trader has access to a further information source which is obscured by an additional noise that may be correlated with the market noise. The informed trader uses the extraneous information source to seek statistical arbitrage opportunities, while at the same time accommodating the additional risk. The amount of information available to the general market participant concerning the asset return is measured by the mutual information of the asset price and the associated cash flow. The worth of the additional information source is then measured in terms of the difference of mutual information between the general market participant and the informed trader. This difference is shown to be nonnegative when the signal-to-noise ratio of the information flow is known in advance. Explicit trading strategies leading to statistical arbitrage opportunities, taking advantage of the additional information, are constructed, illustrating how excess information can be translated into profit.
A general prescription for the treatment of constrained quantum motion is outlined. We consider in particular constraints defined by algebraic submanifolds of the quantum state space. The resulting formalism is applied to obtain solutions to the constrained dynamics of systems of multiple spin-1/2 particles. When the motion is constrained to a certain product space containing all of the energy eigenstates, the dynamics thus obtained are quasi-unitary in the sense that the equations of motion take a form identical to that of unitary motion, but with different boundary conditions. When the constrained subspace is a product space of disentangled states, the associated motion is more intricate. Nevertheless, the equations of motion satisfied by the dynamical variables are obtained in closed form.
We propose a class of discrete-time stochastic models for the pricing of inflation-linked assets. The paper begins with an axiomatic scheme for asset pricing and interest rate theory in a discrete-time setting. The first axiom introduces a "risk-free" asset, and the second axiom determines the intertemporal pricing relations that hold for dividend-paying assets. The nominal and real pricing kernels, in terms of which the price index can be expressed, are then modelled by introducing a Sidrauski-type utility function depending on (a) the aggregate rate of consumption, and (b) the aggregate rate of real liquidity benefit conferred by the money supply. Consumption and money supply policies are chosen such that the expected joint utility obtained over a specified time horizon is maximised subject to a budget constraint that takes into account the "value" of the liquidity benefit associated with the money supply. For any choice of the bivariate utility function, the resulting model determines a relation between the rate of consumption, the price level, and the money supply. The model also produces explicit expressions for the real and nominal pricing kernels, and hence establishes a basis for the valuation of inflation-linked securities.
We consider a financial contract that delivers a single cash flow given by the terminal value of a cumulative gains process. The problem of modelling and pricing such an asset and associated derivatives is important, for example, in the determination of optimal insurance claims reserve policies, and in the pricing of reinsurance contracts. In the insurance setting, the aggregate claims play the role of the cumulative gains, and the terminal cash flow represents the totality of the claims payable for the given accounting period. A similar example arises when we consider the accumulation of losses in a credit portfolio, and value a contract that pays an amount equal to the totality of the losses over a given time interval. An explicit expression for the value process is obtained. The price of an Arrow-Debreu security on the cumulative gains process is determined, and is used to obtain a closed-form expression for the price of a European-style option on the value of the asset. The results obtained make use of various remarkable properties of the gamma bridge process, and are applicable to a wide variety of financial products based on cumulative gains processes such as aggregate claims, credit portfolio losses, defined-benefit pension schemes, emissions, and rainfall.
This paper is concerned with the ergodic subspaces of the state spaces of isolated quantum systems. We prove a new ergodic theorem for closed quantum systems which shows that the equilibrium state of the system takes the form of a grand canonical density matrix involving a complete commuting set of observables including the Hamiltonian. The result obtained, which is derived for a generic finite-dimensional quantum system, shows that the equilibrium state arising from unitary evolution is always expressible in the canonical form, without the consideration of a system-bath decomposition.
Recently, much research has been carried out on Hamiltonians that are not Hermitian but are symmetric under space-time reflection, that is, Hamiltonians that exhibit PT symmetry. Investigations of the Sturm-Liouville eigenvalue problem associated with such Hamiltonians have shown that in many cases the entire energy spectrum is real and positive and that the eigenfunctions form an orthogonal and complete basis. Furthermore, the quantum theories determined by such Hamiltonians have been shown to be consistent in the sense that the probabilities are positive and the dynamical trajectories are unitary. However, the geometrical structures that underlie quantum theories formulated in terms of such Hamiltonians have hitherto not been fully understood. This paper studies in detail the geometric properties of a Hilbert space endowed with a parity structure and analyses the characteristics of a PT-symmetric Hamiltonian and its eigenstates. A canonical relationship between a PT-symmetric operator and a Hermitian operator is established. It is shown that the quadratic form corresponding to the parity operator, in particular, gives rise to a natural partition of the Hilbert space into two halves corresponding to states having positive and negative PT norm. The indefiniteness of the norm can be circumvented by introducing a symmetry operator C that defines a positive definite inner product by means of a CPT conjugation operation.
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow is modelled by a random variable that can be expressed as a function of a collection of independent random variables called market factors. With each such "X-factor" we associate a market information process, the values of which are accessible to market agents. Each information process is a sum of two terms; one contains true information about the value of the market factor; the other represents "noise". The noise term is modelled by an independent Brownian bridge. The market filtration is assumed to be that generated by the aggregate of the independent information processes. The price of an asset is given by the expectation of the discounted cash flows in the risk-neutral measure, conditional on the information provided by the market filtration. When the cash flows are the dividend payments associated with equities, an explicit model is obtained for the share-price, and the prices of options on dividend-paying assets are derived. Remarkably, the resulting formula for the price of a European call option is of the Black-Scholes-Merton type. The information-based framework also generates a natural explanation for the origin of stochastic volatility.
A quantum microcanonical postulate is proposed as a basis for the equilibrium properties of small quantum systems. Expressions for the corresponding density of states are derived, and are used to establish the existence of phase transitions for finite quantum systems. A grand microcanonical ensemble is introduced, which can be used to obtain new rigorous results in quantum statistical mechanics.
Geometric quantum mechanics aims to express the physical properties of quantum systems in terms of geometrical features preferentially selected in the space of pure states. Geometric characterisations are given here for systems of one, two, and three spin-1/2 particles, drawing attention to the classification of quantum states into entanglement types.
A closed-form solution to the energy-based stochastic Schrodinger equation with a time-dependent coupling is obtained. The solution is algebraic in character, and is expressed directly in terms of independent random data. The data consist of (i) a random variable H which has the distribution P(H=E_i) = pi_i, where pi_i is the transition probability from the initial state to the Luders state with energy E_i; and (ii) an independent P-Brownian motion, where P is the physical probability measure associated with the dynamics of the reduction process. When the coupling is time-independent, it is known that state reduction occurs asymptotically--that is to say, over an infinite time horizon. In the case of a time-dependent coupling, we show that if the magnitude of the coupling decreases sufficiently rapidly, then the energy variance will be reduced under the dynamics, but the state need not reach an energy eigenstate. This situation corresponds to the case of a ``partial'' or ``incomplete'' measurement of the energy. We also construct an example of a model where the opposite situation prevails, in which complete state reduction is achieved after the passage of a finite period of time.
A new microcanonical equilibrium state is introduced for quantum systems with finite-dimensional state spaces. Equilibrium is characterised by a uniform distribution on a level surface of the expectation value of the Hamiltonian. The distinguishing feature of the proposed equilibrium state is that the corresponding density of states is a continuous function of the energy, and hence thermodynamic functions are well defined for finite quantum systems. The density of states, however, is not in general an analytic function. It is demonstrated that generic quantum systems therefore exhibit second-order (continuous) phase transitions at finite temperatures.
Space-time symmetries and internal quantum symmetries can be placed on equal footing in a hyperspin geometry. Four-dimensional classical space-time emerges as a result of a decoherence that disentangles the quantum and the space-time degrees of freedom. A map from the quantum space-time to classical space-time that preserves the causality relations of space-time events is necessarily a density matrix.
In standard nonrelativistic quantum mechanics the expectation of the energy is a conserved quantity. It is possible to extend the dynamical law associated with the evolution of a quantum state consistently to include a nonlinear stochastic component, while respecting the conservation law. According to the dynamics thus obtained, referred to as the energy-based stochastic Schrodinger equation, an arbitrary initial state collapses spontaneously to one of the energy eigenstates, thus describing the phenomenon of quantum state reduction. In this article, two such models are investigated: one that achieves state reduction in infinite time, and the other in finite time. The properties of the associated energy expectation process and the energy variance process are worked out in detail. By use of a novel application of a nonlinear filtering method, closed-form solutions--algebraic in character and involving no integration--are obtained for both these models. In each case, the solution is expressed in terms of a random variable representing the terminal energy of the system, and an independent noise process. With these solutions at hand it is possible to simulate explicitly the dynamics of the quantum states of complicated physical systems.
A new energy-based stochastic extension of the Schrodinger equation for which the wave function collapses after the passage of a finite amount of time is proposed. An exact closed-form solution to the dynamical equation, valid for all finite-dimensional quantum systems, is presented and used to verify explicitly that reduction of the state vector to an energy eigenstate occurs. A time-change technique is introduced to construct a `clock' variable that relates the asymptotic and the finite-time collapse models by means of a nonlinear transformation.
A generalised equivalence principle is put forward according to which space-time symmetries and internal quantum symmetries are indistinguishable before symmetry breaking. Based on this principle, a higher-dimensional extension of Minkowski space is proposed and its properties examined. In this scheme the structure of space-time is intrinsically quantum mechanical. It is shown that the causal geometry of such a quantum space-time possesses a rich hierarchical structure. The natural extension of the Poincare group to quantum space-time is investigated. In particular, we prove that the symmetry group of a quantum space-time is generated in general by a system of irreducible Killing tensors. When the symmetries of a quantum space-time are spontaneously broken, then the points of the quantum space-time can be interpreted as space-time valued operators. The generic point of a quantum space-time in the broken symmetry phase thus becomes a Minkowski space-time valued operator. Classical space-time emerges as a map from quantum space-time to Minkowski space. It is shown that the general such map satisfying appropriate causality-preserving conditions ensuring linearity and Poincare invariance is necessarily a density matrix.
The energy-based stochastic extension of the Schrodinger equation is a rather special nonlinear stochastic differential equation on Hilbert space, involving a single free parameter, that has been shown to be very useful for modelling the phenomenon of quantum state reduction. Here we construct a general closed form solution to this equation, for any given initial condition, in terms of a random variable representing the terminal value of the energy and an independent Brownian motion. The solution is essentially algebraic in character, involving no integration, and is thus suitable as a basis for efficient simulation studies of state reduction in complex systems.