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- Author: Belal E. Baaquie
This book introduces in detail the core concepts and practical methods related to Quantum Finance-Path Integrals and Hamiltonians for Options and Interest Rates-Cambridge University Press (2004). This book provides a mathematical perspective on finance that is independent of traditional stochastic calculus approaches, applying mathematical and conceptual formalisms from quantum mechanics and quantum field theory (especially path integrals and Hamiltonians) to option theory and interest rate modeling. The book discusses how to reformulate the Black-Scholes equation in option pricing into a non-Hermitian Hamiltonian, and within this framework, apply commonly used methods in quantum mechanics to derive the pricing kernel. In addition, this book uses Feynman path integrals to derive the Lagrangian and applies it to interest rate theory. The book covers applications of Hamiltonians and path integrals in finite-degree-of-freedom systems to stock options and stochastic interest rates, as well as quantum field theory for interest rate models, including quantum field theory for forward rates, comparisons of empirical analysis and field theory models for forward rates, and field theory for Treasury derivatives and hedging. This book is suitable for physicists and mathematicians interested in financial physics and financial mathematics, as well as quantitative analysts in banks and financial companies, and practitioners in the fields of fixed income securities and foreign exchange.
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