Modelling Illiquid Stocks Using Quantum Stochastic Calculus

19 Pages Posted: 13 Feb 2023

See all articles by William Hicks

William Hicks

Memorial University Of Newfoundland

Date Written: February 10, 2023

Abstract

Quantum Stochastic Calculus can be used as a means by which randomness can be introduced to observables acting on a Hilbert space. In this article we show how the mechanisms of Quantum Stochastic Calculus can be used to extend the classical Black-Scholes framework by incorporating a breakdown in the liquidity of a traded asset. This is captured via the widening of the bid offer spread, and the impact on the nature of the resulting probability distribution is modelled in this work.

Keywords: Quantum Stochastic Calculus, Quantum Black Scholes

Suggested Citation

Hicks, William, Modelling Illiquid Stocks Using Quantum Stochastic Calculus (February 10, 2023). Available at SSRN: https://ssrn.com/abstract=4353712 or http://dx.doi.org/10.2139/ssrn.4353712

William Hicks (Contact Author)

Memorial University Of Newfoundland ( email )

+447779719236 (Phone)

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