Book contents
- Frontmatter
- Contents
- Prologue
- Acknowledgements
- 1 Synopsis
- 2 Interest rates and coupon bonds
- 3 Options and option theory
- 4 Interest rate and coupon bond options
- 5 Quantum field theory of bond forward interest rates
- 6 Libor Market Model of interest rates
- 7 Empirical analysis of forward interest rates
- 8 Libor Market Model of interest rate options
- 9 Numeraires for bond forward interest rates
- 10 Empirical analysis of interest rate caps
- 11 Coupon bond European and Asian options
- 12 Empirical analysis of interest rate swaptions
- 13 Correlation of coupon bond options
- 14 Hedging interest rate options
- 15 Interest rate Hamiltonian and option theory
- 16 American options for coupon bonds and interest rates
- 17 Hamiltonian derivation of coupon bond options
- Epilogue
- A Mathematical background
- B US debt markets
- Glossary of physics terms
- Glossary of finance terms
- List of symbols
- References
- Index
Epilogue
Published online by Cambridge University Press: 11 April 2011
- Frontmatter
- Contents
- Prologue
- Acknowledgements
- 1 Synopsis
- 2 Interest rates and coupon bonds
- 3 Options and option theory
- 4 Interest rate and coupon bond options
- 5 Quantum field theory of bond forward interest rates
- 6 Libor Market Model of interest rates
- 7 Empirical analysis of forward interest rates
- 8 Libor Market Model of interest rate options
- 9 Numeraires for bond forward interest rates
- 10 Empirical analysis of interest rate caps
- 11 Coupon bond European and Asian options
- 12 Empirical analysis of interest rate swaptions
- 13 Correlation of coupon bond options
- 14 Hedging interest rate options
- 15 Interest rate Hamiltonian and option theory
- 16 American options for coupon bonds and interest rates
- 17 Hamiltonian derivation of coupon bond options
- Epilogue
- A Mathematical background
- B US debt markets
- Glossary of physics terms
- Glossary of finance terms
- List of symbols
- References
- Index
Summary
At present, mainstream theoretical finance is almost completely dominated by stochastic calculus. Quantum finance, in contrast, presents a formulation of finance that is completely independent of stochastic calculus. Quantum finance addressed only a few problems of finance. The onus thus fell on me to demonstrate that a wide class of problems of finance, which at present are understood in terms of stochastic calculus, have a natural quantum finance formulation and generalization. It needed to be established that the quantum formulation of finance is equivalent to the one based on stochastic calculus and – if it is to be useful for the practitioners – is conceptually transparent and computationally tractable. Furthermore, it needed to be shown that quantum finance is not merely equivalent to stochastic calculus but goes beyond it; namely, that models based on quantum finance are more general than those based on stochastic calculus.
Interest rates and coupon bonds and their derivatives form a major component of the debt market. They are, by far, the most complex and intricate types of financial instruments that also have a rich mathematical structure. Debt instruments provided an ideal testing ground for quantum finance. I gravitated to the study of interest rates and coupon bonds, since these financial instruments provide an excellent arena for exhibiting the main features of quantum finance – as well as for illustrating its point of departure from stochastic calculus.
No attempt has been made to survey the subject of debt instruments, for which there exists a vast corpus of literature. Instead, this book has focused on only new results that have been obtained by applying quantum finance to debt instruments.
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- Information
- Interest Rates and Coupon Bonds in Quantum Finance , pp. 433 - 435Publisher: Cambridge University PressPrint publication year: 2009