On the probability flow in the Stock market I: The Black-Scholes case
Resource type
Authors/contributors
- Arraut, Ivan (Author)
- Au, Alan (Author)
- Tse, Alan Ching-biu (Author)
- Marques, Joao Alexandre Lobo (Author)
Title
On the probability flow in the Stock market I: The Black-Scholes case
Abstract
It is known that the probability is not a conserved quantity in the stock market, given the fact that it corresponds to an open system. In this paper we analyze the flow of probability in this system by expressing the ideal Black-Scholes equation in the Hamiltonian form. We then analyze how the non-conservation of probability affects the stability of the prices of the Stocks. Finally, we find the conditions under which the probability might be conserved in the market, challenging in this way the non-Hermitian nature of the Black-Scholes Hamiltonian.
Publication
Volume
1
Pages
1-10
Date
2020
Language
English
Short Title
On the probability flow in the Stock market I
Accessed
2/3/21, 7:58 AM
Library Catalog
ProQuest
Rights
© 2019. This work is published under http://arxiv.org/licenses/nonexclusive-distrib/1.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.
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Link
Citation
Arraut, I., Au, A., Tse, A. C., & Marques, J. A. L. (2020). On the probability flow in the Stock market I: The Black-Scholes case. ArXiv.Org, 1, 1–10. https://search.proquest.com/docview/2332255379?pq-origsite=primo
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