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This paper presents a tractable model of non-linear dynamics of market returns using a Langevin approach.Due to non-linearity of an interaction potential, the model admits regimes of both small and large return fluctuations. Langevin dynamics are mapped onto an equivalent quantum mechanical (QM)...
Persistent link: https://www.econbiz.de/10013251128
Persistent link: https://www.econbiz.de/10010233264
Classical quantitative finance models such as the Geometric Brownian Motion or its later extensions such as local or stochastic volatility models do not make sense when seen from a physics-based perspective, as they are all equivalent to a negative mass oscillator with a noise. This paper...
Persistent link: https://www.econbiz.de/10012826182
This is a supplementary note for the paper "QLBS: Q-Learner in the Black-Scholes(-Merton) Worlds" found here:'http://ssrn.com/abstract=3087076' http://ssrn.com/abstract=3087076,that explains how a model developed there applies to the problem of relative pricing of options in a data-driven...
Persistent link: https://www.econbiz.de/10012941052