Feynman perturbation expansion for the price of coupon bond options and swaptions in quantum finance. I. Theory.

@article{Baaquie2007FeynmanPE,
  title={Feynman perturbation expansion for the price of coupon bond options and swaptions in quantum finance. I. Theory.},
  author={Belal E. Baaquie},
  journal={Physical review. E, Statistical, nonlinear, and soft matter physics},
  year={2007},
  volume={75 1 Pt 2},
  pages={016703}
}
  • Belal E. Baaquie
  • Published 2007 in
    Physical review. E, Statistical, nonlinear, and…
European options on coupon bonds are studied in a quantum field theory model of forward interest rates. Swaptions are briefly reviewed. An approximation scheme for the coupon bond option price is developed based on the fact that the volatility of the forward interest rates is a small quantity. The field theory for the forward interest rates is Gaussian, but when the payoff function for the coupon bond option is included it makes the field theory nonlocal and nonlinear. A perturbation expansion… CONTINUE READING