Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.physa.2010.08.046
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dc.titleSimulation of coupon bond European and barrier options in quantum finance
dc.contributor.authorBaaquie, B.E.
dc.contributor.authorPan, T.
dc.date.accessioned2014-10-16T09:41:01Z
dc.date.available2014-10-16T09:41:01Z
dc.date.issued2010-01-15
dc.identifier.citationBaaquie, B.E., Pan, T. (2010-01-15). Simulation of coupon bond European and barrier options in quantum finance. Physica A: Statistical Mechanics and its Applications 390 (2) : 263-289. ScholarBank@NUS Repository. https://doi.org/10.1016/j.physa.2010.08.046
dc.identifier.issn03784371
dc.identifier.urihttp://scholarbank.nus.edu.sg/handle/10635/97930
dc.description.abstractCoupon bond European and barrier options are studied in the framework of quantum finance. The prices of European and barrier options are analyzed by generating sample values of the forward interest rates f(t,x) using a two-dimensional Gaussian quantum field A(t,x). The strong correlations of forward interest rates are described by the stiff propagator of the quantum field A(t,x). Using the Cholesky decomposition, A(t,x) is expressed in terms of white noise. The simulation results for European coupon bond and barrier options are compared with approximate formulas, which are obtained as power series in the volatility of the forward interest rates. The simulation shows that the simulated price deviates from the approximate value for large volatilities. The numerical algorithm is flexible and can be used for pricing any kind of option. It is shown that the three-factor HJM model can be derived from the quantum finance formulation. © 2010 Elsevier B.V. All rights reserved.
dc.description.urihttp://libproxy1.nus.edu.sg/login?url=http://dx.doi.org/10.1016/j.physa.2010.08.046
dc.sourceScopus
dc.subjectBarrier option
dc.subjectCoupon bond option
dc.subjectMonte Carlo simulation
dc.subjectQuantum finance
dc.typeArticle
dc.contributor.departmentPHYSICS
dc.description.doi10.1016/j.physa.2010.08.046
dc.description.sourcetitlePhysica A: Statistical Mechanics and its Applications
dc.description.volume390
dc.description.issue2
dc.description.page263-289
dc.description.codenPHYAD
dc.identifier.isiut000285655100015
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