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Spontaneous symmetry breaking in Quantum Finance

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  • Ivan Arraut
  • Alan Au
  • Alan Ching-biu Tse

Abstract

We analyze the phenomena of spontaneous symmetry breaking in Quantum Finance by using as a starting point the Black-Scholes (BS) and the Merton-Garman (MG) equations expressed in the Hamiltonian form. In this scenario the martingale condition (state) corresponds to the vacuum state which becomes degenerate when the symmetry of the system is spontaneously broken. We then analyze the broken symmetries of the system and we interpret from the perspective of Financial markets the possible appearance of the Nambu-Goldstone bosons.

Suggested Citation

  • Ivan Arraut & Alan Au & Alan Ching-biu Tse, 2020. "Spontaneous symmetry breaking in Quantum Finance," Papers 2011.05278, arXiv.org.
    • Handle: RePEc:arx:papers:2011.05278
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    References listed on IDEAS

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    1. Arraut, Ivan & Au, Alan & Tse, Alan Ching-biu & Segovia, Carlos, 2019. "The connection between multiple prices of an Option at a given time with single prices defined at different times: The concept of weak-value in quantum finance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 526(C).
    2. Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
    3. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    4. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    5. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    6. Ivan Arraut & Alan Au & Alan Ching-biu Tse & Carlos Segovia, 2019. "The connection between multiple prices of an Option at a given time with single prices defined at different times: The concept of weak-value in quantum finance," Papers 1905.05813, arXiv.org.
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    Cited by:

    1. Peng Wang, 2023. "Risk-Sensitive Maximum Principle for Controlled System with Delay," Mathematics, MDPI, vol. 11(4), pages 1-12, February.
    2. Ivan Arraut & João Alexandre Lobo Marques & Sergio Gomes, 2021. "The Probability Flow in the Stock Market and Spontaneous Symmetry Breaking in Quantum Finance," Mathematics, MDPI, vol. 9(21), pages 1-18, November.

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