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Abstract

An option price was derived exactly in Baaquie (2019) using the quantum oscillator. The derivation of the oscillator option price that is based on evaluating the pricing kernel using the Feynman path integral was briefly reviewed. The oscillator option price is a generalization of the Black-Scholes option price and contains new parameters. In the current paper, the hedging parameters are exactly derived for the generalized option price and are seen to be far more complicated than the Black-Scholes hedging parameters. The parameters in the oscillator option price do not require the daily value of implied volatility for pricing the option since these parameters encode the information that is missing in the Black-Scholes option price.

Keywords

osicllator model option delta gamma theta oscillator option pricing model put-call parity path integral derivation

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The Quantum Oscillator Model for Options: Pricing and Hedging

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