Author(s)

Mauricio Contreras, Rely Pellicer, Daniel Santiagos, Marcelo Villena

Facultad de Ingeniería y Ciencias, Universidad Adolfo Ibánez, Santiago, Chile.

An non-equilibrium Black-Scholes model, where the usual constant interest rate r is replaced by a stochastic time dependent rate r(t) of the form r(t)=r+f (t)W(t), accounting for market imperfections and prices non-alignment, is developed. The white noise amplitude f (t), called arbitrage bubble, generates a time dependent potential U(t) which changes the usual equilibrium dynamics of the traditional Black-Scholes model. The purpose of this article is to tackle the inverse problem, that is, is it possible to extract the time dependent potential U(t) and its associated bubble shape f (t), from the real empirical financial data? In order to give an answer to this question, the interacting Black-Scholes equation must be interpreted as a quantum Schrodinger equation with Hamiltonian operator H=H₀+ U(t), where H₀ is the equilibrium Black-Scholes Hamiltonian and U(t) is the interaction term. By using semi-classical considerations and the knowledge about the mispricing of the financial data, one can determinate an approximate functional form of the potential term U(t) and its associated bubble f (t), In all the studied cases, the non-equilibrium model performs a better estimation of the real data than the usual equilibrium model. It is expected that this new and simple methodology could help to improve option pricing estimations.

Option Pricing, Non-Equilibrium Black-Scholes Model, Semi-Classical Approximation, Quantum Mechanical Methods, Crank-Nicholson Method

Contreras, M. , Pellicer, R. , Santiagos, D. and Villena, M. (2016) Calibration and Simulation of Arbitrage Effects in a Non-Equilibrium Quantum Black-Scholes Model by Using Semi-Classical Methods. Journal of Mathematical Finance, 6, 541-561. doi: 10.4236/jmf.2016.64042.