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Quantum option pricing using Wick rotated imaginary time evolution

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  • Santosh Kumar Radha

Abstract

In this paper we reformulate the problem of pricing options in a quantum setting. Our proposed algorithm involves preparing an initial state, representing the option price, and then evolving it using existing imaginary time simulation algorithms. This way of pricing options boils down to mapping an initial option price to a quantum state and then simulating the time dependence in Wick's imaginary time space. We numerically verify our algorithm for European options using a particular imaginary time evolution algorithm as proof of concept and show how it can be extended to path dependent options like Asian options. As the proposed method uses a hybrid variational algorithm, it is bound to be relevant for near-term quantum computers.

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  • Santosh Kumar Radha, 2021. "Quantum option pricing using Wick rotated imaginary time evolution," Papers 2101.04280, arXiv.org.
    • Handle: RePEc:arx:papers:2101.04280
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