The phase space of a relativistic system can be identified with the future tube of complexified Minkowski space. As well as a complex structure and a symplectic structure, the future tube, seen as an eight-dimensional real manifold, is endowed with a
natural positive-definite Riemannian metric that accommodates the underlying geometry of the indefinite Minkowski space metric, together with its symmetry group. A unitary representation of the 15-parameter group of conformal transformations can then be constructed that acts upon the Hilbert space of square-integrable holomorphic functions on the future tube. These structures are enough to allow one to put forward a quantum theory of phase-space events. In particular, a theory of quantum measurement can be formulated in a relativistic setting, based on the use of positive operator valued measures, for the detection of phase-space events, hence allowing one to assign probabilities to the outcomes of joint space-time and four-momentum measurements in a manifestly covariant framework. This leads to a localization theorem for phase-space events in relativistic quantum theory, determined by the associated Compton wavelength.
A term structure model in which the short rate is zero is developed as a candidate for a theory of cryptocurrency interest rates. The price processes of crypto discount bonds are worked out, along with expressions for the instantaneous forward rates
and the prices of interest-rate derivatives. The model admits functional degrees of freedom that can be calibrated to the initial yield curve and other market data. Our analysis suggests that strict local martingales can be used for modelling the pricing kernels associated with virtual currencies based on distributed ledger technologies.
A new framework for deriving equations of motion for constrained quantum systems is introduced, and a procedure for its implementation is outlined. In special cases the framework reduces to a quantum analogue of the Dirac theory of constrains in clas
sical mechanics. Explicit examples involving spin-1/2 particles are worked out in detail: in one example our approach coincides with a quantum version of the Dirac formalism, while the other example illustrates how a situation that cannot be treated by Diracs approach can nevertheless be dealt with in the present scheme.
We propose a class of discrete-time stochastic models for the pricing of inflation-linked assets. The paper begins with an axiomatic scheme for asset pricing and interest rate theory in a discrete-time setting. The first axiom introduces a risk-free
asset, and the second axiom determines the intertemporal pricing relations that hold for dividend-paying assets. The nominal and real pricing kernels, in terms of which the price index can be expressed, are then modelled by introducing a Sidrauski-type utility function depending on (a) the aggregate rate of consumption, and (b) the aggregate rate of real liquidity benefit conferred by the money supply. Consumption and money supply policies are chosen such that the expected joint utility obtained over a specified time horizon is maximised subject to a budget constraint that takes into account the value of the liquidity benefit associated with the money supply. For any choice of the bivariate utility function, the resulting model determines a relation between the rate of consumption, the price level, and the money supply. The model also produces explicit expressions for the real and nominal pricing kernels, and hence establishes a basis for the valuation of inflation-linked securities.
We consider a financial contract that delivers a single cash flow given by the terminal value of a cumulative gains process. The problem of modelling and pricing such an asset and associated derivatives is important, for example, in the determination
of optimal insurance claims reserve policies, and in the pricing of reinsurance contracts. In the insurance setting, the aggregate claims play the role of the cumulative gains, and the terminal cash flow represents the totality of the claims payable for the given accounting period. A similar example arises when we consider the accumulation of losses in a credit portfolio, and value a contract that pays an amount equal to the totality of the losses over a given time interval. An explicit expression for the value process is obtained. The price of an Arrow-Debreu security on the cumulative gains process is determined, and is used to obtain a closed-form expression for the price of a European-style option on the value of the asset. The results obtained make use of various remarkable properties of the gamma bridge process, and are applicable to a wide variety of financial products based on cumulative gains processes such as aggregate claims, credit portfolio losses, defined-benefit pension schemes, emissions, and rainfall.
Recently, much research has been carried out on Hamiltonians that are not Hermitian but are symmetric under space-time reflection, that is, Hamiltonians that exhibit PT symmetry. Investigations of the Sturm-Liouville eigenvalue problem associated wit
h such Hamiltonians have shown that in many cases the entire energy spectrum is real and positive and that the eigenfunctions form an orthogonal and complete basis. Furthermore, the quantum theories determined by such Hamiltonians have been shown to be consistent in the sense that the probabilities are positive and the dynamical trajectories are unitary. However, the geometrical structures that underlie quantum theories formulated in terms of such Hamiltonians have hitherto not been fully understood. This paper studies in detail the geometric properties of a Hilbert space endowed with a parity structure and analyses the characteristics of a PT-symmetric Hamiltonian and its eigenstates. A canonical relationship between a PT-symmetric operator and a Hermitian operator is established. It is shown that the quadratic form corresponding to the parity operator, in particular, gives rise to a natural partition of the Hilbert space into two halves corresponding to states having positive and negative PT norm. The indefiniteness of the norm can be circumvented by introducing a symmetry operator C that defines a positive definite inner product by means of a CPT conjugation operation.
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow is modell
ed by a random variable that can be expressed as a function of a collection of independent random variables called market factors. With each such X-factor we associate a market information process, the values of which are accessible to market agents. Each information process is a sum of two terms; one contains true information about the value of the market factor; the other represents noise. The noise term is modelled by an independent Brownian bridge. The market filtration is assumed to be that generated by the aggregate of the independent information processes. The price of an asset is given by the expectation of the discounted cash flows in the risk-neutral measure, conditional on the information provided by the market filtration. When the cash flows are the dividend payments associated with equities, an explicit model is obtained for the share-price, and the prices of options on dividend-paying assets are derived. Remarkably, the resulting formula for the price of a European call option is of the Black-Scholes-Merton type. The information-based framework also generates a natural explanation for the origin of stochastic volatility.
Geometric quantum mechanics aims to express the physical properties of quantum systems in terms of geometrical features preferentially selected in the space of pure states. Geometric characterisations are given here for systems of one, two, and three
spin-1/2 particles, drawing attention to the classification of quantum states into entanglement types.
