Nonlinear Schrödinger approach to European option pricing

Open Physics

Wróblewski Marcin¹ 

[1] Systems Research Institute of Polish Academy of Sciences, Phd doctoral study, Poland, Warsaw;

关键词: nonlinear schrödinger equation;    atomic potentials;    option pricing;    levenberg-marquardt optimization;    runge-kutta method;    88.05.lg;    03.75.nt;    03.65.ge;    03.65.sq;   

DOI  :  10.1515/phys-2017-0031

来源: DOAJ

【 摘 要 】

This paper deals with numerical option pricing methods based on a Schrödinger model rather than the Black-Scholes model. Nonlinear Schrödinger boundary value problems seem to be alternatives to linear models which better reflect the complexity and behavior of real markets. Therefore, based on the nonlinear Schrödinger option pricing model proposed in the literature, in this paper a model augmented by external atomic potentials is proposed and numerically tested. In terms of statistical physics the developed model describes the option in analogy to a pair of two identical quantum particles occupying the same state. The proposed model is used to price European call options on a stock index. the model is calibrated using the Levenberg-Marquardt algorithm based on market data. A Runge-Kutta method is used to solve the discretized boundary value problem numerically. Numerical results are provided and discussed. It seems that our proposal more accurately models phenomena observed in the real market than do linear models.

【 授权许可】

Unknown