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Option Pricing beyond Black-Scholes Model:Quantum Mechanics Approach

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  • Pengpeng Li
  • Shi-Dong Liang

Abstract

Based on the analog between the stochastic dynamics and quantum harmonic oscillator, we propose a market force driving model to generalize the Black-Scholes model in finance market. We give new schemes of option pricing, in which we can take various unexpected market behaviors into account to modify the option pricing. As examples, we present several market forces to analyze their effects on the option pricing. These results provide us two practical applications. One is to be used as a new scheme of option pricing when we can predict some hidden market forces or behaviors emerging. The other implies the existence of some risk premium when some unexpected forces emerge.

Suggested Citation

  • Pengpeng Li & Shi-Dong Liang, 2026. "Option Pricing beyond Black-Scholes Model:Quantum Mechanics Approach," Papers 2601.00293, arXiv.org.
    • Handle: RePEc:arx:papers:2601.00293
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    1. Scott, Louis O., 1987. "Option Pricing when the Variance Changes Randomly: Theory, Estimation, and an Application," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(4), pages 419-438, December.
    2. 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.
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