A quantum model of supply and demand

Orrell, David

doi:10.1016/j.physa.2019.122928

Cited by 27 publications

(23 citation statements)

References 24 publications

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“…In the classic case, probabilities Ψ indicate the objective state of the game, and the weights combine these probabilities with the winners . The problem is that there is no punishment administered to the fact that nothing is unwinnable, what is known as influencing decisions [13][14][15][16]. Based on La Mura's theory of projected expected benefits, this can be done in a quantum system by choosing an observational U that would be a Hermitian operator where non-diagonal conditions are not zero.…”

Section: Possibilities Of Market Negotiation Modelling Using Spectrummentioning

confidence: 99%

Comparison of The Possibilities of Application of Spectrum and Gaming Theories in Modelling Market Economy Negotiations

Peleckis

Peleckienė

2021

SHS Web of Conf.

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Research background: In negotiations, in modelling decision-making at both the individual and market levels, it is important to understand and be able to assess important aspects of economic behaviour. The theory of spectrum is proposed to be applied in modelling decision making. The object of the research is the possibilities of application of spectrum and game theories. Classical economic theory does not define subjective parameters of economic behaviour, therefore, when modelling market negotiation strategies, it is difficult to identify and evaluate appropriate parameters of economic behaviour required for decision-making in market negotiations. The spectrum theory approach can be used to model the economy, both at the individual and market levels, which is especially relevant in international business negotiations, where the modelling of solutions and various operations presents opportunities to assess subjective parameters. Purpose of the article: The aim of the paper is to investigate and compare the application of spectral decay and gambling theories in modelling market economy negotiations. Research methods: Scientific literature analysis, comparative, logical analysis and synthesis, comparative and generalization methods, game theory, quantum cognition methods. Findings & Value added: The article examines the basic principles of behavioural economics: the functions of assessing the psychological value and uncertainty of monetary gain or loss, how both theories take these principles into account: game and spectrum.

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Section: Possibilities Of Market Negotiation Modelling Using Spectrummentioning

confidence: 99%

Comparison of The Possibilities of Application of Spectrum and Gaming Theories in Modelling Market Economy Negotiations

Peleckis

Peleckienė

2021

SHS Web of Conf.

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“…For simplicity, we can assume that the probability of a transaction occurring at a particular price is described by a normal distribution P(x) with mean μ and standard deviation σ, multiplied by a rate constant which reflects the total probability of a transaction. As seen in Orrell (2020a), it is possible to derive these parameters in terms of properties of the buyers and sellers, but for present purposes they are taken as given.…”

Section: Quantize Thismentioning

confidence: 99%

“…It can easily be generalized to multiple buyers and sellers, if we assume that each group is made up of identical agents. The result is a stochastic model, similar to the stochastic models of chemical kinetics used in systems biology (Orrell, 2020a). A more general approach, however, would be to simulate interactions between agents using a quantum agent-based model.…”

Section: Quantum Oscillationsmentioning

confidence: 99%

Quantum‐tative Finance

Orrell¹

2020

Wilmott

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“…Relation of quantum-mechanical framework to stochastic approach is shown in [18][19], whose author takes the reverse approach to derive the financial Schrodinger equation from the traditional stochastics. In [20] the Schrodinger equation is used to explore price uncertainty within the spread by quantizing the potential created by buyers and sellers and leading to gradual change from underpriced state to overpriced as opposed to classical theory, where that boundary is sharp. Inclusion of microstructural dependencies leads to quantum formulation in [21] as well, as the authors model price evolution under linear market impact…”

Section: δ = −mentioning

confidence: 99%

Quantum coupled-wave theory of price formation in financial markets: Price measurement, dynamics and ergodicity

Sarkissian¹

2020

Physica A: Statistical Mechanics and its Applications

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We explore nature of price formation in financial markets and develop a theory of bid and ask price dynamics in which the two prices form due to quantum-chaotic interaction between buy and sell orders.In this model bid and ask prices are represented by eigenvalues of a 2x2 price operator corresponding to "bid" and "ask" eigenstates, while randomness of price operator results in price fluctuations that destroy oscillatory effects. We show that this theory adequately captures behavior of bid-ask spread and allows to model bid and ask price dynamics in a coordinated way. We also discuss ergodicity properties of price formation and show how directional price movement occurs due to ergodicity violation in a quantum process instead of the commonly believed forces acting on price. This theory has wide range of applications such as trade execution modeling, large order pricing and risk valuation for illiquid securities. Stochastic calculus vs. financial marketsModern quantitative finance is built around stochastic calculus treating price movements as random walk [1][2][3]. In doing so it implicitly relies on certain assumptions, that are supposed to ensure similarity between the two processes. Over the decades, countless models have been produced based on this similarity. However, in practice these models are almost always used without verifying the validity of the underlying assumptions. Such careless application of models can easily lead to lack of control, position mismanagement and financial losses [4][5][6]. Let us therefore examine, what criteria ensure similarity between price movements and random walk.

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A quantum model of supply and demand

Cited by 27 publications

References 24 publications

Comparison of The Possibilities of Application of Spectrum and Gaming Theories in Modelling Market Economy Negotiations

Comparison of The Possibilities of Application of Spectrum and Gaming Theories in Modelling Market Economy Negotiations

Quantum‐tative Finance

Quantum coupled-wave theory of price formation in financial markets: Price measurement, dynamics and ergodicity

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