Quantum finance

yoscar04

yoscar04

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Dear all, Dr. Raymond S. T. Lee in his book on Quantum Finance (page 112), normalize quantum price return QPR(n) using the following scaling:
Normalized QPR(n)=1+0.21*sigma*QPR(n).
I don't know of any way of explaining this equation.
sigma is the standard deviation of the wave function solution of a Schrodinger equation.
QPR(n)=E(n)/E(0), where E are the eigenvalues of an an-harmonic quantum oscillator (Schrodinger equation with a quadratic and a quartic term)
Thanks!
 
First, I see no question.

Second, I cannot imagine why finance would have anything to do with the Shrodinger equation. Does Dr. Lee explain this in his book?

Third, does you equation really have "QPR(n)" on both sides of the equation? If so it is simple to solve for QPR(n): from QPR(n)= 1+ 0.21*sigma*QPR subtract 0.21*sigma*QPR from both sides to get QPR(n)- 0.21*sigma*QPR(n)= (1- 0.21*sigma)QPR= 1 and then, dividing both sides by (1- 0.21*sigma), \(\displaystyle QPR(n)= \frac{1}{1- 0.21*sigma}\).

(I would have expected something like "QPR(n+1)= (1+ 0.21*sigma)QPR(n).)
 
There is a question: why the normalized form is like:Normalized QPR(n) =1+0.21*sigma*QPR(n) . They are not the same, the one appeared on the left in normalized. The one on the right is not. So to rephrase the question, what is the normalization or scaling used in the book?
Your last line in parenthesis, doesn't make any sense.
 
@HallsofIvy

So I read the Wikipedia article on quantum finance. It is not clear to me (and I don't have enough interest to spend hours in research) whether (a) it's a scam designed to siphon money from options traders to math geeks, (b) there is empirical evidence of sufficient similarity in the behavior of the stock market to Brownian motion that the mathematics of quantum physics can be applied to stock prices with a significant degree of reliability, or (c) the consequence of some economic theory is that mathematically the economic theory is homomorphic to quantum physics.

Being cynical, I suspect it is approximately 60% a, 30% b, and 10% c. After all, there seem to be perfectly respectable economic models that treat the economy as an atomless measure space, which means I think that individual human beings are eliminated from the model. From there, it seems a small step to imagine virtual human beings popping in and out of the economic void.

True story. I worked briefly with a man who had been a grad student of Merton Miller, who with Franco Modigliani won the Nobel in economics for his work on the Miller-Modigliani Theorem. I was having lunch with this man and carping about the unrealism of the premises behind the theorem. The man looked at me with surprise and said, "You think Merton doesn't know that."
 
"it's a scam designed to siphon money from options traders to math geeks". I'm a math geek! How do I get in on this?
 
HallsofIvy said:
"it's a scam designed to siphon money from options traders to math geeks". I'm a math geek! How do I get in on this?
Click to expand...
I think a prerequisite is a degree from MIT. On the other hand, the Wall Street types I have known are pretty credulous. So maybe all you need is to spend a day learning by heart the vocabulary of options trading, figure out a few equations that use the Riemann zeta function, and set up shop.
 
1) I don't recall asking any one to spend time doing research in econometrics.
2) I just asked a plain question., hoping that maybe someone thought about it.
3) Applying Brownian motion has turned out to be not very useful.
4) There are some serious people I know that have invested some time in the subject, like Jim Simons, Sorin Solomon and Fratisek Slanina . I don't believe they are involved in running any scam.
Anyway, we are wasting time now if you don't know the answer to the question I asked.
Thanks any way. Best.
 
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