Quantum Theory for the Binomial Model in Finance Theory
Abstract
In this paper, a quantum model for the binomial market in finance is proposed. We show that its risk-neutral world exhibits an intriguing structure as a disk in the unit ball of ${\bf R}^3,$ whose radius is a function of the risk-free interest rate with two thresholds which prevent arbitrage opportunities from this quantum market. Furthermore, from the quantum mechanical point of view we re-deduce the Cox-Ross-Rubinstein binomial option pricing formula by considering Maxwell-Boltzmann statistics of the system of $N$ distinguishable particles.
- Publication:
-
arXiv e-prints
- Pub Date:
- December 2001
- DOI:
- 10.48550/arXiv.quant-ph/0112156
- arXiv:
- arXiv:quant-ph/0112156
- Bibcode:
- 2001quant.ph.12156C
- Keywords:
-
- Quantum Physics
- E-Print:
- Latex, 8 pages,1 figure, revised version,submitted