Quantum Finance: The Finite Dimensional Case

Details Quantum Finance: The Finite Dimensional Case Quantum Finance: The Finite Dimensional Case

2001-12-26

arxiv.org/abs/quant-ph/0112158v2

Physics

Quantum Physics

22 pages, revised version, submitted

Scientific paper

In this paper, we present a quantum version of some portions of Mathematical Finance, including theory of arbitrage, asset pricing, and optional decomposition in financial markets based on finite dimensional quantum probability spaces. As examples, the quantum model of binomial markets is studied. We show that this quantum model ceases to pose the paradox which appears in the classical model of the binomial market. Furthermore, we re-deduce the Cox-Ross-Rubinstein binomial option pricing formula by considering multi-period quantum binomial markets.

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