# Professor Dorje C Brody

## About

### Biography

I am a Professor in the Department of Mathematics at the University of Surrey. My research interests include foundations of quantum theory, quantum biology, mathematical psychology, and financial modelling.

## Publications

We introduce a family of operations in quantum mechanics that one can regard as "universal quantum measurements" (UQMs). These measurements are applicable to all finite dimensional quantum systems and entail the specification of only a minimal amount of structure. The first class of UQM that we consider involves the specification of the initial state of the system—no further structure is brought into play. We call operations of this type "tomographic measurements", since given the statistics of the outcomes one can deduce the original state of the system. Next, we construct a disentangling operation, the outcome of which, when the procedure is applied to a general mixed state of an entangled composite system, is a disentangled product of pure constituent states. This operation exists whenever the dimension of the Hilbert space is not a prime, and can be used to model the decay of a composite system. As another example, we show how one can make a measurement of the direction along which the spin of a particle of spin s is oriented (s = 1/2, 1,...). The required additional structure in this case involves the embedding of CP1 as a rational curve of degree 2s in CP2s.

It is possible to extract work from a quantum-mechanical system whose dynamics is governed by a time-dependent cyclic Hamiltonian. An energy bath is required to operate such a quantum engine in place of the heat bath used to run a conventional classical thermodynamic heat engine. The effect of the energy bath is to maintain the expectation value of the system Hamiltonian during an isoenergetic process. It is shown that the existence of such a bath leads to equilibrium quantum states that maximize the von Neumann entropy. Quantum analogues of certain thermodynamic relations are obtained that allow one to define the temperature of the energy bath.

The probability of a given candidate winning a future election is worked out in closed form as a function of (i) the current support rates for each candidate, (ii) the relative positioning of the candidates within the political spectrum, (iii) the time left to the election, and (iv) the rate at which noisy information is revealed to the electorate from now to the election day, when there are three or more candidates. It is shown, in particular, that the optimal strategy for controlling information can be intricate and nontrivial, in contrast to a two-candidate race. A surprising finding is that for a candidate taking the centre ground in an electoral competition among a polarised electorate, certain strategies are fatal in that the resulting winning probability for that candidate vanishes identically.

A framework for statistical-mechanical analysis of quantum Hamiltonians is introduced. The approach is based upon a gradient flow equation in the space of Hamiltonians such that the eigenvectors of the initial Hamiltonian evolve towards those of the reference Hamiltonian. The nonlinear double-bracket equation governing the flow is such that the eigenvalues of the initial Hamiltonian remain unperturbed. The space of Hamiltonians is foliated by compact invariant subspaces, which permits the construction of statistical distributions over the Hamiltonians. In two dimensions, an explicit dynamical model is introduced, wherein the density function on the space of Hamiltonians approaches an equilibrium state characterized by the canonical ensemble. This is used to compute quenched and annealed averages of quantum observables.

The solution to the problem of finding a time-optimal control Hamiltonian to generate a given unitary gate, in an environment in which there exists an uncontrollable ambient Hamiltonian (e.g., a background field), is obtained. In the classical context, finding the time-optimal way to steer a ship in the presence of a background wind or current is known as the Zermelo navigation problem, whose solution can be obtained by working out geodesic curves on a space equipped with a Randers metric. The solution to the quantum Zermelo problem, which is shown here to take a remarkably simple form, is likewise obtained by finding explicit solutions to the geodesic equations of motion associated with a Randers metric on the space of unitary operators. The result reveals that the optimal control in a sense "goes along with the wind."

The geometric Levy model (GLM) is a natural generalization of the geometric Brownian motion (GBM) model used in the derivation of the Black-Scholes formula. The theory of such models simplifies considerably if one takes a pricing kernel approach. In one dimension, once the underlying Levy process has been specified, the GLM has four parameters: the initial price, the interest rate, the volatility and the risk aversion. The pricing kernel is the product of a discount factor and a risk aversion martingale. For GBM, the risk aversion parameter is the market price of risk. For a GLM, this interpretation is not valid: the excess rate of return is a nonlinear function of the volatility and the risk aversion. It is shown that for positive volatility and risk aversion, the excess rate of return above the interest rate is positive, and is increasing with respect to these variables. In the case of foreign exchange, Siegel's paradox implies that one can construct foreign exchange models for which the excess rate of return is positive for both the exchange rate and the inverse exchange rate. This condition is shown to hold for any geometric Levy model for foreign exchange in which volatility exceeds risk aversion.

A quantum spline is a smooth curve parametrized by time in the space of unitary transformations, whose associated orbit on the space of pure states traverses a designated set of quantum states at designated times, such that the trace norm of the time rate of change of the associated Hamiltonian is minimized. The solution to the quantum spline problem is obtained, and is applied in an example that illustrates quantum control of coherent states. An efficient numerical scheme for computing quantum splines is discussed and implemented in the examples.

Complex dynamical systems driven by the unravelling of information can be modelled effectively by treating the underlying flow of information as the model input. Complicated dynamical behaviour of the system is then derived as an output. Such an information-based approach is in sharp contrast to the conventional mathematical modelling of information-driven systems whereby one attempts to come up with essentially ad hoc models for the outputs. Here, dynamics of electoral competition is modelled by the specification of the flow of information relevant to election. The seemingly random evolution of the election poll statistics are then derived as model outputs, which in turn are used to study election prediction, impact of disinformation, and the optimal strategy for information management in an election campaign.

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 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, aggregate claims play the role of 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 expression for the value process of such an asset is derived as follows. We fix a probability space, together with a pricing measure, and model the terminal cash flow by a random variable; next, we model the cumulative gains process by the product of the terminal cash flow and an independent gamma bridge; finally, we take the filtration to be that generated by the cumulative gains process. An explicit expression for the value process is obtained by taking the discounted expectation of the future cash flow, conditional on the relevant market information. 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 at the given intermediate time. The results obtained make use of 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.

When investors have heterogeneous attitudes towards risk, it is reasonable to assume that each investor has a pricing kernel, and that these individual pricing kernels are aggregated to form a market pricing kernel. The various investors are then buyers or sellers depending on how their individual pricing kernels compare with that of the market. In Brownian-based models, we can represent such heterogeneous attitudes by letting the market price of risk be a random variable, the distribution of which corresponds to the variability of attitude across the market. If the flow of market information is determined by the movements of prices, then neither the Brownian driver nor the market price of risk are directly visible: the filtration is generated by an 'information process' given by a combination of the two. We show that the market pricing kernel is then given by the harmonic mean of the individual pricing kernels associated with the various market participants. Remarkably, with an appropriate definition of Levy information one draws the same conclusion in the case when asset prices can jump. As a consequence, we are led to a rather general scheme for the management of investments in heterogeneous markets subject to jump risk.

The cognitive state of mind concerning a range of choices to be made can be modelled efficiently by use of an element of a high-dimensional Hilbert space. The dynamics of the state of mind resulting from information acquisition can be characterised by the von Neumann–Lüders projection postulate of quantum theory. This is shown to give rise to an uncertainty-minimising dynamical behaviour equivalent to Bayesian updating, hence providing an alternative approach to representing the dynamics of a cognitive state, consistent with the free energy principle in brain science. The quantum formalism, however, goes beyond the range of applicability of classical reasoning in explaining cognitive behaviour, thus opening up new and intriguing possibilities.

In quantum mechanics the eigenstates of the Hamiltonian form a complete basis. However, physicists conventionally express completeness as a formal sum over the eigenstates, and this sum is typically a divergent series if the Hilbert space is infinite dimensional. Furthermore, while the Hamiltonian can be reconstructed formally as a sum over its eigenvalues and eigenstates, this series is typically even more divergent. For the simple cases of the square-well and the harmonic-oscillator potentials, this paper explains how to use the elementary procedure of Euler summation to sum these divergent series and thereby to make sense of the formal statement of the completeness of the formal sum that represents the reconstruction of the Hamiltonian.

We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of the market factors, represented by the values of a set of market factor information processes. The market filtration is taken to be generated jointly by the various information processes and by the default indicator processes of the various bonds. The value of a discount bond is obtained by taking the discounted expectation of the value of the default indicator function at the maturity of the bond, conditional on the information provided by the market filtration. Explicit expressions are derived for the bond price processes and the associated default hazard rates. The latter are not given a priori as part of the model but rather are deduced and shown to be functions of the values of the information processes. Thus the "perceived" hazard rates, based on the available information, determine bond prices, and as perceptions change so do the prices. In conclusion, explicit expressions are derived for options on discount bonds, the values of which also fluctuate in line with the vicissitudes of market sentiment.

In the information-based approach to asset pricing, the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market then determines the overall magnitude of asset volatility. By letting this information flow rate random, we obtain an elementary stochastic volatility model within the information-based approach. Such an extension is justified on account of the fact that in real markets information flow rates are rarely measurable. Effects of having a random information flow rate are investigated in detail in the context of a simple model setup. Specifically, the price process of an elementary defaultable bond is derived, and its characteristic behaviours are revealed via simulation studies. The price of a European-style option on the bond is worked out, showing that the model has a sufficient flexibility to fit volatility surface. As an extension of the random information flow model, modelling of price manipulation is considered. A simple model is used to show how the skewness of the manipulated and unmanipulated price processes take opposite signature.

If X and Y are independent, Y and Z are independent, and so are X and Z, one might be tempted to conclude that X, Y, and Z are independent. But it has long been known in classical probability theory that, intuitive as it may seem, this is not true in general. In quantum mechanics one can ask whether analogous statistics can emerge for configurations of particles in certain types of entangled states. The explicit construction of such states, along with the specification of suitable sets of observables that have the purported statistical properties, is not entirely straightforward. We show that an example of such a configuration arises in the case of an N-particle GHZ state, and we are able to identify a family of observables with the property that the associated measurement outcomes are independent for any choice of $2,3,____ldots ,N-1$ of the particles, even though the measurement outcomes for all N particles are not independent. Although such states are highly entangled, the entanglement turns out to be 'fragile', i.e. the associated density matrix has the property that if one traces out the freedom associated with even a single particle, the resulting reduced density matrix is separable.

In standard quantum mechanics, it is postulated that when the wave function of a quantum system is measured, it no longer follows the Schrödinger equation, but instantaneously and randomly collapses to one of the wave functions that correspond to definite measurement results. However, why and how a definite measurement result appears is unknown. A promising solution to this problem are collapse theories in which the collapse of the wave function is spontaneous and dynamical. Chapters written by distinguished physicists and philosophers of physics discuss the origin and implications of wave-function collapse, the controversies around collapse models and their ontologies, and new arguments for the reality of wave function collapse.

In this article, the authors present a method of generating interest rate dynamics from elementary economic considerations. There are of course numerous economic factors that affect the movement of interest rates, and causal relations that hold between these factors are often difficult to disentangle. So, rather than attempting to address a range of factors simultaneously, they will focus on one factor important in determining the interest rate term structure, namely the liquidity risk, in the narrow sense of cash demand. The interplay between liquidity and interest rates has long been discussed in economics literature (see, for example, Friedman, 1968). Their objective is to build an information-based model that reflects the market perception of future liquidity risk, and use it for the pricing and general risk management of interest rate derivatives. Empirical studies indicate that a persistent increase in money supply leads in the short term to a fall in nominal interest rates. This is the so-called liquidity effect (Cochrane, 1989).

Starting with the canonical ensemble over the space of pure quantum states, we obtain an integral representation for the associated partition function. This is used to calculate the magnetisation of a system of N spin-1/2 particles. The results suggest the existence of a first order phase transition that occurs at zero temperature in the absence of spin-spin interactions. (C) 2010 Elsevier B.V. All rights reserved.

Motivated by the recent developments of pseudo-Hermitian quantum mechanics, we analyze the structure generated by unbounded metric operators in a Hilbert space. To that effect, we consider the notions of similarity and quasi-similarity between operators and explore to what extent they preserve spectral properties. Then we study quasi-Hermitian operators, bounded or not, that is, operators that are quasi-similar to their adjoint and we discuss their application in pseudo-Hermitian quantum mechanics. Finally, we extend the analysis to operators in a partial inner product space (\pip), in particular the scale of Hilbert spaces generated by a single unbounded metric operator.

The entropic calibration of the risk-neutral density function is effective in recovering the strike dependence of options, but encounters difficulties in determining the relevant greeks. By use of put-call reversal we apply the entropic method to the time reversed economy, which allows us to obtain the spot price dependence of options and the relevant greeks.

An elementary `quantum-mechanical' derivation of the conditions for a system of functions to form a Riesz basis of a Hilbert space on a finite interval is presented.

Quaternionic quantum Hamiltonians describing nonrelativistic spin particles require the ambient physical space to have five dimensions. The quantum dynamics of a spin-1/2 particle system characterized by a generic Hamiltonian is worked out in detail. It is shown that there exists, within the structure of quaternionic quantum mechanics, a canonical reduction to three spatial dimensions upon which standard quantum theory is retrieved. In this dimensional reduction, three of the five dynamical variables are shown to oscillate around a cylinder, thus behaving in a quasi-one-dimensional manner at large distances. An analogous mechanism is shown to exist in the case of octavic Hamiltonians, where the ambient physical space has nine dimensions. Possible experimental tests in search for the signature of extra dimensions at low energies are briefly discussed.

In quantum mechanics the eigenstates of the Hamiltonian form a complete basis. However, physicists conventionally express completeness as a formal sum over the eigenstates, and this sum is typically a divergent series if the Hilbert space is infinite dimensional. Furthermore, while the Hamiltonian can be reconstructed formally as a sum over its eigenvalues and eigenstates, this series is typically even more divergent. For the simple cases of the square-well and the harmonic-oscillator potentials this paper explains how to use the elementary procedure of Euler summation to sum these divergent series and thereby to make sense of the formal statement of the completeness of the formal sum that represents the reconstruction of the Hamiltonian.

Journal of Mathematical Physics 43, 5254-5261 (2002) The energy-based stochastic extension of the Schrodinger equation is a rather special nonlinear stochastic differential equation on Hilbert space, involving a single free parameter, that has been shown to be very useful for modelling the phenomenon of quantum state reduction. Here we construct a general closed form solution to this equation, for any given initial condition, in terms of a random variable representing the terminal value of the energy and an independent Brownian motion. The solution is essentially algebraic in character, involving no integration, and is thus suitable as a basis for efficient simulation studies of state reduction in complex systems.

In this Letter it is shown that an i phi(3) quantum field theory is a physically acceptable model because the spectrum is positive and the theory is unitary. The demonstration rests on the perturbative construction of a linear operator C, which is needed to define the Hilbert space inner product. The C operator is a new, time-independent observable in PT-symmetric quantum field theory.

This paper presents an overview of information-based asset pricing. In the information-based approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is determined by a collection of independent market factors called X-factors. The market filtration is generated by a set of information processes, each of which carries information about one of the X-factors, and eventually reveals the X-factor in a way that ensures that the associated cash flows have the correct measurability properties. In the models considered each information process has two terms, one of which contains a "signal" about the associated X-factor, and the other of which represents "market noise". The existence of an established pricing kernel, adapted to the market filtration, is assumed. The price of an asset is given by the expectation of the discounted cash flows in the associated risk-neutral measure, conditional on the information provided by the market. When the market noise is modelled by a Brownian bridge, one is able to construct explicit formulae for asset prices, as well as semi-analytic expressions for the prices and greeks of options and derivatives. In particular, option price data can be used to determine the information flow-rate parameters implicit in the definitions of the information processes. One consequence of the modelling framework is a specific scheme of stochastic volatility and correlation processes. Instead of imposing a volatility and correlation model upon the dynamics of a set of assets, one is able to deduce the dynamics of the volatilities and correlations of the asset price movements from more primitive assumptions involving the associated cash flows. The paper concludes with an examination of situations involving asymmetric information. We present a simple model for informed traders and show how this can be used as a basis for so-called statistical arbitrage. Finally, we consider the problem of price formation in a heterogeneous market with multiple agents.

A framework for deriving equations of motion for constrained quantum systems is introduced and a procedure for its implementation is outlined. In special cases, the proposed new method, which takes advantage of the fact that the space of pure states in quantum mechanics has both a symplectic structure and a metric structure, reduces to a quantum analogue of the Dirac theory of constraints in classical mechanics. Explicit examples involving spin-1/2 particles are worked out in detail: in the first example, our approach coincides with a quantum version of the Dirac formalism, while the second example illustrates how a situation that cannot be treated by Dirac's approach can nevertheless be dealt with in the present scheme.

The classical derivation of the well-known Vasicek model for interest rates is reformulated in terms of the associated pricing kernel. An advantage of the pricing kernel method is that it allows one to generalize the construction to the Levy-Vasicek case, avoiding issues of market incompleteness. In the Levy-Vasicek model the short rate is taken in the real-world measure to be a mean-reverting process with a general one-dimensional Levy driver admitting exponential moments. Expressions are obtained for the Levy-Vasicek bond prices and interest rates, along with a formula for the return on a unit investment in the long bond, defined by Lt = limT1 PtT =P0T , where PtT is the price at time t of a T-maturity discount bond. We show that the pricing kernel of a Levy-Vasicek model is uniformly integrable if and only if the long rate of interest is strictly positive.

The state spaces of generalized coherent states associated with special unitary groups are shown to form rational curves and surfaces in the space of pure states. These curves and surfaces are generated by the various Veronese embeddings of the underlying state space into higher dimensional state spaces. This construction is applied to the parameterization of generalized coherent states, which is useful for practical calculations, and provides an elementary combinatorial approach to the geometry of the coherent state space. The results are extended to Hilbert spaces with indefinite inner products, leading to the introduction of a new kind of generalized coherent states.

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.

The Hermiticity condition in quantum mechanics required for the characterization of (a) physical observables and (b) generators of unitary motions can be relaxed into a wider class of operators whose eigenvalues are real and whose eigenstates are complete. In this case, the orthogonality of eigenstates is replaced by the notion of biorthogonality that defines the relation between the Hilbert space of states and its dual space. The resulting quantum theory, which might appropriately be called 'biorthogonal quantum mechanics', is developed here in some detail in the case for which the Hilbert-space dimensionality is finite. Specifically, characterizations of probability assignment rules, observable properties, pure and mixed states, spin particles, measurements, combined systems and entanglements, perturbations, and dynamical aspects of the theory are developed. The paper concludes with a brief discussion on infinite-dimensional systems.

It is necessary to calculate the C operator for the non-Hermitian PT-symmetric Hamiltonian H=\half p^2+\half\mu^2x^2-\lambda x^4 in order to demonstrate that H defines a consistent unitary theory of quantum mechanics. However, the C operator cannot be obtained by using perturbative methods. Including a small imaginary cubic term gives the Hamiltonian H=\half p^2+\half \mu^2x^2+igx^3-\lambda x^4, whose C operator can be obtained perturbatively. In the semiclassical limit all terms in the perturbation series can be calculated in closed form and the perturbation series can be summed exactly. The result is a closed-form expression for C having a nontrivial dependence on the dynamical variables x and p and on the parameter \lambda.

A framework for the investigation of disordered quantum systems in thermal equilibrium is proposed. The approach is based on a dynamical model-which consists of a combination of a double-bracket gradient flow and a uniform Brownian fluctuation-that 'equilibrates' the Hamiltonian into a canonical distribution. The resulting equilibrium state is used to calculate quenched and annealed averages of quantum observables.

The well-known theorem of Dybvig, Ingersoll, and Ross shows that the long zero-coupon rate can never fall. This result, which, although undoubtedly correct, has been regarded by many as surprising, stems from the implicit assumption that the long-term discount function has an exponential tail. We revisit the problem in the setting of modern interest rate theory, and show that if the long “simple” interest rate (or Libor rate) is ﬁnite, then this rate (unlike the zero-coupon rate) acts viably as a state variable,the value of which can ﬂuctuate randomly in line with other economic indicators. New interest rate models are constructed, under this hypothesis and certain generalizations thereof, that illustrate explicitly the good asymptotic behavior of the resulting discount bond systems. The conditions necessary for the existence of such “hyperbolic” and “generalized hyperbolic” long rates are those of so-called social discounting, which allow for long-term cash ﬂows to be treated as broadly “just as important” as those of the short or medium term. As a consequence, we are able to provide a consistent arbitrage-free valuation framework for the cost-beneﬁt analysis and risk management of long-term social projects, such as those associated with sustainable energy, resource conservation, and climate change

If a Hamiltonian of a quantum system is symmetric under space-time reflection, then the associated eigenvalues can be real. A conjugation operation for quantum states can then be defined in terms of space-time reflection, but the resulting Hilbert space inner product is not positive definite and gives rise to an interpretational difficulty. One way of resolving this difficulty is to introduce a superselection rule that excludes quantum states having negative norms. It is shown here that a quantum theory arising in this way gives an example of Kibble’s nonlinear quantum mechanics, with the property that the state space has a constant negative curvature. It then follows from the positive curvature theorem that the resulting quantum theory is not physically viable. This conclusion also has implications to other quantum theories obtained from the imposition of analogous superselection rules.

This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model makes use of the concept of market information about future supply and demand as a basis for valuation. Physical ownership of a commodity is regarded as providing a stream of "convenience dividends" equivalent to a continuous cash flow. The market filtration is assumed to be generated jointly by (i) current and past levels of the dividend rate, and (ii) partial information concerning the future of the dividend flow. The price of a commodity is given by the expectation of the totality of the discounted risk-adjusted future convenience dividend, conditional on the information provided by the market filtration. In the situation where the dividend rate is modelled by an Ornstein-Uhlenbeck process, the prices of options on commodities can be derived in closed form, both in the case when underlying is the spot price, and in the case when underlying is a futures price. The approach presented can be applied to other assets that can yield potentially negative effective cash flows, such as real estate, factories, refineries, mines, and power generating plants.

Using a sheaf-theoretic extension of conventional principal bundle theory, the Dirac monopole is formulated as a spherically symmetric model free of singularities outside the origin such that the charge may assume arbitrary real values. For integral charges, the construction effectively coincides with the usual model. Spin structures and Dirac operators are also generalized by the same technique.

Brody, D C; Hughston, L P and Yang, X. 2022. On the Pricing of Storable Commodities. In: Dorje C Brody; L P Hughston and A Macrina, eds. Financial Informatics: An Information-Based Approach to Asset Pricing. Singapore: World Scientific Publishing Company. ISBN 9789811246487 [Book Section] This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical ownership of a commodity is taken to provide a stream of convenience dividends equivalent to a continuous cash flow. The market filtration is assumed to be generated jointly by (i) current and past levels of the dividend rate, and (ii) partial information concerning the future of the dividend flow. The price of a commodity is the expectation under a suitable pricing measure of the totality of the discounted risk-adjusted future convenience dividend, conditional on the information provided by the market filtration. In the situation where the dividend rate is modelled by an Ornstein-Uhlenbeck process, the prices of options on commodities can be derived in closed form. The approach that we present can be applied to other assets that yield potentially negative effective cash flows, such as real estate, factories, refineries, mines, and power generating plants.

On the basis of extensive numerical studies it is argued that there are strong analogies between the probabilistic behavior of quantum systems defined by Hermitian Hamiltonians and the deterministic behavior of classical mechanical systems extended into the complex domain. Three models are examined: the quartic double-well potential V ( x) = x(4) -5x(2), the cubic potential V ( x) = 1/2x(2) - gx(3), and the periodic potential V ( x) = -cos x. For the quartic potential a wave packet that is initially localized in one side of the double-well can tunnel to the other side. Complex solutions to the classical equations of motion exhibit a remarkably analogous behavior. Furthermore, classical solutions come in two varieties, which resemble the even-parity and odd-parity quantum-mechanical bound states. For the cubic potential, a quantum wave packet that is initially in the quadratic portion of the potential near the origin will tunnel through the barrier and give rise to a probability current that flows out to infinity. The complex solutions to the corresponding classical equations of motion exhibit strongly analogous behavior. For the periodic potential a quantum particle whose energy lies between -1 and 1 can tunnel repeatedly between adjacent classically allowed regions and thus execute a localized random walk as it hops from region to region. Moreover, if the energy of the quantum particle lies in a conduction band, then the particle delocalizes and drifts freely through the periodic potential. A classical particle having complex energy executes a qualitatively analogous local random walk, and there exists a narrow energy band for which the classical particle becomes delocalized and moves freely through the potential.

Requiring that a Hamiltonian be Hermitian is overly restrictive. A consistent physical theory of quantum mechanics can be built on a complex Hamiltonian that is not Hermitian but satisfies the less restrictive and more physical condition of space-time reflection symmetry (PT symmetry). One might expect a non-Hermitian Hamiltonian to lead to a violation of unitarity. However, if PT symmetry is not spontaneously broken, it is possible to construct a previously unnoticed symmetry C of the Hamiltonian. Using C, an inner product whose associated norm is positive definite can be constructed. The procedure is general and works for any PT-symmetric Hamiltonian. Observables exhibit CPT symmetry, and the dynamics is governed by unitary time evolution. This work is not in conflict with conventional quantum mechanics but is rather a complex generalization of it.

A model is proposed that describes the evolution of a mixed state of a quantum system for which gain and loss of energy or amplitude are present. Properties of the model are worked out in detail. In particular, invariant subspaces of the space of density matrices corresponding to the fixed points of the dynamics are identified, and the existence of a transition between the phase in which gain and loss are balanced and the phase in which this balance is lost is illustrated in terms of the time average of observables. The model is extended to include a noise term that results from a uniform random perturbation generated by white noise. Numerical studies of example systems show the emergence of equilibrium states that suppress the phase transition.

The detection and processing of environmental information is a fundamental attribute of all living systems. This article approaches the question of how efficiently plants process that information, considering it likely that differential efficiency among different species may help explain differential survival. The primary routes of information transfer, that is, signal transduction, are relatively well understood. It is pointed out, based on current understanding, that erasure of such information may be of equal importance to its acquisition. This in turn could provide a simple means of quantifying the acquisition of information by a plant and the efficiency in doing so. However, wild plants live in an environment that is noisy. A useful analogy to deal with such situations can be found in quantum theory of open systems, wherein processes are both well-characterized and well understood, unlike those in plants. This paper develops this theme from quantum information processing and provides a mean of transferring such quantum characterization to biological dynamical situations. The article concludes with discussion on communication theory, indicating that there is a dearth of experimental results that can currently be used to investigate information processing but suggesting how progress can be made in this important programme.

A new microcanonical equilibrium state is introduced for quantum systems with finite-dimensional state spaces. Equilibrium is characterized by a uniform distribution on a level surface of the expectation value of the Hamiltonian. The distinguishing feature of the proposed equilibrium state is that the corresponding density of states is a continuous function of the energy, and hence thermodynamic functions are well defined for finite quantum systems. The density of states, however, is not in general an analytic function. It is demonstrated that generic quantum systems therefore exhibit second-order phase transitions at finite temperatures.

Using the square-root map p -> root p a probability density function p can be represented as a point of the unit sphere S in the Hilbert space of square-integrable functions. If the density function depends smoothly on a set of parameters, the image of the map forms a Riemannian submanifold M subset of S. The metric on M induced by the ambient spherical geometry of S is the Fisher information matrix. Statistical properties of the system modelled by a parametric density function p can then be expressed in terms of information geometry. An elementary introduction to information geometry is presented, followed by a precise geometric characterization of the family of Gaussian density functions. When the parametric density function describes the equilibrium state of a physical system, certain physical characteristics can be identified with geometric features of the associated information manifold M. Applying this idea, the properties of vapour-liquid phase transitions are elucidated in geometrical terms. For an ideal gas, phase transitions are absent and the geometry of M is flat. In this case, the solutions to the geodesic equations yield the adiabatic equations of state. For a van der Waals gas, the associated geometry of M is highly nontrivial. The scalar curvature of M diverges along the spinodal boundary which envelopes the unphysical region in the phase diagram. The curvature is thus closely related to the stability of the system.

The objective of this paper is to explain and elucidate the formalism of PT quantum mechanics by applying it to a well-known problem in conventional Hermitian quantum mechanics, namely the problem of state discrimination. Suppose that a system is known to be in one of two quantum states, vertical bar psi(1)> or vertical bar psi(2)>. If these states are not orthogonal, then the requirement of unitarity forbids the possibility of discriminating between these two states with one measurement; that is, determining with one measurement what state the system is in. In conventional quantum mechanics, there is a strategy in which successful state discrimination can be achieved with a single measurement but only with a success probability p that is less than unity. In this paper, the state-discrimination problem is examined in the context of PT quantum mechanics and the approach is based on the fact that a non-Hermitian PT-symmetric Hamiltonian determines the inner product that is appropriate for the Hilbert space of physical states. It is shown that it is always possible to choose this inner product so that the two states vertical bar psi(1)> and vertical bar psi(2)> are orthogonal. Using PT quantum mechanics, one cannot achieve a better state discrimination than in ordinary quantum mechanics, but one can instead perform a simulated quantum state discrimination, in which with a single measurement a perfect state discrimination is realized with probability p. (C) 2013 The Author(s) Published by the Royal Society. All rights reserved.

A set of elementary axioms for stochastic finance is presented wherein a prominent role is played by the state-price density, which in turn determines the stochastic dynamics of the interest-rate term structure. The fact that the state-price density is a potential implies the existence of an asymptotic random variable X∞ with the property that its conditional variance is the state-price density. The Wiener chaos expansion technique can then be applied to X∞, thus enabling us to 'parametrize' the dynamics of the discount-bond system in terms of the deterministic coefficients of the chaos expansion. Using this method, we find that there is a natural map from the space of all admissible term-structure trajectories to the symmetric Fock space F naturally associated with the space of square-integrable random variables on the underlying probability space. An element of F is either coherent or incoherent, and a stochastic bond-price system is necessarily represented by an incoherent element of F. Making use of the linearity of F we derive simple analytic formulae for the bond-price system, the volatility structure, the short rate, and the risk premium associated with an arbitrary admissible term-structure model. Extensions to foreign-exchange markets and general asset systems are also developed.

The Wiener chaos approach to interest-rate modeling arises from the observation that in the general context of an arbitrage-free model with a Brownian filtration, the pricing kernel admits a representation in terms of the conditional variance of a square-integrable generator, which in turn admits a chaos expansion. When the expansion coefficients of the random generator factorize into multiple copies of a single function, the resulting interest-rate model is called "coherent", whereas a generic interest-rate model is necessarily "incoherent". Coherent representations are of fundamental importance because an incoherent generator can always be expressed as a linear superposition of coherent elements. This property is exploited to derive general expressions for the pricing kernel and the associated bond price and short rate processes in the case of a generic nth order chaos model, for each n ∈ ℕ. Pricing formulae for bond options and swaptions are obtained in closed form for a number of examples. An explicit representation for the pricing kernel of a generic incoherent model is then obtained by use of the underlying coherent elements. Finally, finite-dimensional realizations of coherent chaos models are investigated and we show that a class of highly tractable models can be constructed having the characteristic feature that the discount bond price is given by a piecewise-flat (simple) process.

The space of density matrices is embedded in a Euclidean space to deduce the dynamical equation satisfied by the state of an open quantum system. The Euclidean norm is used to obtain an explicit expression for the speed of the evolution of the state. The unitary contribution to the evolution speed is given by the modified skew information of the Hamiltonian, while the radial component of the evolution speed, connected to the rate at which the purity of the state changes, is shown to be determined by the modified skew information of the Lindblad operators. An open-system analogue of the quantum navigation problem is posed, and a perturbative analysis is presented to identify the amount of change on the speed. Properties of the evolution speed are examined further through example systems, showing that the evolution speed need not be a decreasing function of time.

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.

The space of density matrices is embedded in a Euclidean space to deduce the dynamical equation satisfied by the state of an open quantum system. The Euclidean norm is used to obtain an explicit expression for the speed of the evolution of the state. The unitary contribution to the evolution speed is given by the modified skew information of the Hamiltonian, while the radial component of the evolution speed, connected to the rate at which the purity of the state changes, is shown to be determined by the modified skew information of the Lindblad operators. An open-system analog of the quantum navigation problem is posed, and a perturbative analysis is presented to identify the amount of change on the speed. Properties of the evolution speed are examined further through example systems, showing that the evolution speed need not be a decreasing function of time.

Recently there has been much progress in the development of stochastic models for state reduction in quantum mechanics. In such models, the collapse of the wave function is a physical process, governed by a nonlinear stochastic differential equation that generalizes the Schrödinger equation. The present paper considers energy-based stochastic extensions of the Schrödinger equation. Most of the work carried out hitherto in this area has been concerned with models where the process driving the stochastic dynamics of the quantum state is Brownian motion. Here, the Brownian framework is broadened to a wider class of models where the noise process is of the Lévy type, admitting stationary and independent increments. The properties of such models are different from those of Brownian reduction models. In particular, for Lévy models the decoherence rate depends on the overall scale of the energy. Thus, in Lévy reduction models, a macroscopic quantum system will spontaneously collapse to an eigenstate even if the energy level gaps are small.

Proceedings of the Royal Society London 459, 2297-2316 (2003) The energy-based stochastic extension of the Schrodinger equation is perhaps the simplest mathematically rigourous and physically plausible model for the reduction of the wave function. In this article we apply a new simulation methodology for the stochastic framework to analyse formulae for the dynamics of a particle confined to a square-well potential. We consider the situation when the width of the well is expanded instantaneously. Through this example we are able to illustrate in detail how a quantum system responds to an energy perturbation, and the mechanism, according to the stochastic evolutionary law, by which the system relaxes spontaneously into one of the stable eigenstates of the Hamiltonian. We examine in particular how the expectation value of the Hamiltonian and the probability distribution for the position of the particle change in time. An analytic expression for the typical timescale of relaxation is derived. We also consider the small perturbation limit, and discuss the relation between the stochastic framework and the quantum adiabatic theorem.

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.

The calibration of the risk-neutral density function for the future asset price, based on the maximisation of the entropy measure of Rényi, is proposed. Whilst the conventional approach based on the use of logarithmic entropy measure fails to produce the observed power-law distribution when calibrated against option prices, the approach outlined here is shown to produce the desired form of the distribution. Procedures for the maximisation of the Rényi entropy under constraints are outlined in detail, and a number of interesting properties of the resulting power-law distributions are also derived. The result is applied to efficiently evaluate prices of path-independent derivatives.

In the 'positive interest' models of Flesaker-Hughston, the nominal discount bond system is determined by a one-parameter family of positive martingales. In this paper, we extend this analysis to include a variety of distributions for the martingale family, parameterized by a function that determines the behaviour of the market risk premium. These distributions include jump and diffusion characteristics that generate various properties for discount bond returns. For example, one can choose the martingale family to be given by exponential gamma processes or by exponential variance-gamma processes. The models are 'rational' in the sense that the discount bond price is given by a ratio of weighted sums of positive martingales. Our findings lead to semi-analytical formulae for the prices of options on discount bonds. A number of general results concerning Lévy models for interest rates are presented as well.

Lévy processes, which have stationary independent increments, are ideal for modelling the various types of noise that can arise in communication channels. If a Lévy process admits exponential moments, then there exists a parametric family of measure changes called Esscher transformations. If the parameter is replaced with an independent random variable, the true value of which represents a 'message', then under the transformed measure the original Lévy process takes on the character of an 'information process'. In this paper we develop a theory of such Lévy information processes. The underlying Lévy process, which we call the fiducial process, represents the 'noise type'. Each such noise type is capable of carrying a message of a certain specification. A number of examples are worked out in detail, including information processes of the Brownian, Poisson, gamma, variance gamma, negative binomial, inverse Gaussian and normal inverse Gaussian type. Although in general there is no additive decomposition of information into signal and noise, one is led nevertheless for each noise type to a well-defined scheme for signal detection and enhancement relevant to a variety of practical situations.

A formula for the Taylor series expansion of the r th power of the modified Bessel function [I ν (z)] r is derived for arbitrary r. The result is expressed in terms of a recursive formula for a class of polynomials, which facilitates the systematic construction of the expansion of [I ν (z)] r .

A new approach to credit risk modelling is introduced that avoids the use of inaccessible stopping times. Default events are associated directly with the failure of obligors to make contractually agreed payments. Noisy information about impending cash flows is available to market participants. In this framework, the market filtration is modelled explicitly, and is assumed to be generated by one or more independent market information processes. Each such information process carries partial information about the values of the market factors that determine future cash flows. For each market factor, the rate at which true information is provided to market participants concerning the eventual value of the factor is a parameter of the model. Analytical expressions that can be readily used for simulation are presented for the price processes of defaultable bonds with stochastic recovery. Similar expressions can be formulated for other debt instruments, including multi-name products. An explicit formula is derived for the value of an option on a defaultable discount bond. It is shown that the value of such an option is an increasing function of the rate at which true information is provided about the terminal payoff of the bond. One notable feature of the framework is that it satisfies an overall dynamic consistency condition that makes it suitable as a basis for practical modelling situations where frequent recalibration may be necessary.

The dynamical equation satisfied by the density matrix when a quantum system is subjected to one or more constraints arising from conserved quantities is derived. The resulting nonlinear evolution of the density matrix has the property that it is independent of the specific composition of the pure-state mixture generating the initial state of the system.

Given an initial quantum state |psi_I> and a final quantum state |psi_F> in a Hilbert space, there exist Hamiltonians H under which |psi_I> evolves into |psi_F>. Consider the following quantum brachistochrone problem: Subject to the constraint that the difference between the largest and smallest eigenvalues of H is held fixed, which H achieves this transformation in the least time tau? For Hermitian Hamiltonians tau has a nonzero lower bound. However, among non-Hermitian PT-symmetric Hamiltonians satisfying the same energy constraint, tau can be made arbitrarily small without violating the time-energy uncertainty principle. This is because for such Hamiltonians the path from |psi_I> to |psi_F> can be made short. The mechanism described here is similar to that in general relativity in which the distance between two space-time points can be made small if they are connected by a wormhole. This result may have applications in quantum computing.

An asymmetric information model is introduced for the situation in which there is a small agent who is more susceptible to the flow of information in the market than the general market participant, and who tries to implement strategies based on the additional information. In this model market participants have access to a stream of noisy information concerning the future return of an asset, whereas the informed trader has access to a further information source which is obscured by an additional noise that may be correlated with the market noise. The informed trader uses the extraneous information source to seek statistical arbitrage opportunities, while at the same time accommodating the additional risk. The amount of information available to the general market participant concerning the asset return is measured by the mutual information of the asset price and the associated cash flow. The worth of the additional information source is then measured in terms of the difference of mutual information between the general market participant and the informed trader. This difference is shown to be non-negative when the signal-to-noise ratio of the information flow is known in advance. Explicit trading strategies leading to statistical arbitrage opportunities, taking advantage of the additional information, are constructed, illustrating how excess information can be translated into profit.

Information geometry provides a tool to systematically investigate the parameter sensitivity of the state of a system. If a physical system is described by a linear combination of eigenstates of a complex (that is, non-Hermitian) Hamiltonian, then there can be phase transitions where dynamical properties of the system change abruptly. In the vicinities of the transition points, the state of the system becomes highly sensitive to the changes of the parameters in the Hamiltonian. The parameter sensitivity can then be measured in terms of the Fisher-Rao metric and the associated curvature of the parameter-space manifold. A general scheme for the geometric study of parameter-space manifolds of eigenstates of complex Hamiltonians is outlined here, leading to generic expressions for the metric.

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 consistent physical theory of quantum mechanics can be built on a complex Hamiltonian that is not Hermitian but instead satisfies the physical condition of space–time reflection symmetry (PT symmetry). Thus, there are infinitely many new Hamiltonians that one can construct that might explain experimental data. One would think that a quantum theory based on a non-Hermitian Hamiltonian violates unitarity. However, if PT symmetry is not broken, it is possible to use a previously unnoticed physical symmetry of the Hamiltonian to construct an inner product whose associated norm is positive definite. This construction is general and works for any PT-symmetric Hamiltonian. The dynamics is governed by unitary time evolution. This formulation does not conflict with the requirements of conventional quantum mechanics. There are many possible observable and experimental consequences of extending quantum mechanics into the complex domain, both in particle physics and in solid state physics.

A generalized equivalence principle is put forward according to which space-time symmetries and internal quantum symmetries are indistinguishable before symmetry breaking. Based on this principle, a higher-dimensional extension of Minkowski space is proposed and its properties examined. In this scheme the structure of space-time is intrinsically quantum mechanical. It is shown that the causal geometry of such a quantum space-time (QST) possesses a rich hierarchical structure. The natural extension of the Poincaré group to QST is investigated. In particular, we prove that the symmetry group of this space is generated in general by a system of irreducible Killing tensors. After the symmetries are broken, the points of the QST can be interpreted as space-time valued operators. The generic point of a QST in the broken symmetry phase then becomes a Minkowski space-time valued operator. Classical space-time emerges as a map from QST to Minkowski space. It is shown that the general such map satisfying appropriate causality-preserving conditions ensuring linearity and Poincaré invariance is necessarily a density matrix.

Stochastic extensions of the Schrödinger equation have attracted attention recently as plausible models for state reduction in quantum mechanics. Here we formulate a general approach to stochastic Schrödinger dynamics in the case of a nonlinear state space of the type proposed by Kibble. We derive a number of new identities for observables in the nonlinear theory, and establish general criteria on the curvature of the state space sufficient to ensure collapse of the wave function.

Uncertainty lower bounds for parameter estimations associated with a unitary family of mixed-state density matrices are obtained by embedding the space of density matrices in the Hilbert space of square-root density matrices. In the Hilbert-space setup the measure of uncertainty is given by the skew information of the second kind, while the uncertainty lower bound is given by the Wigner-Yanase skew information associated with the conjugate observable. Higher-order corrections to the uncertainty lower bound are determined by higher-order quantum skew moments; expressions for these moments are worked out in closed form.

While real Hamiltonian mechanics and Hermitian quantum mechanics can both be cast in the framework of complex canonical equations, their complex generalizations have hitherto remained tangential. In this communication, quaternionic and coquaternionic (split-signature analogue of quaternions) extensions of Hamiltonian mechanics are introduced and are shown to offer a unifying framework for complexified classical and quantum mechanics. In particular, quantum theories characterized by complex Hamiltonians invariant under spacetime reflection are shown to be equivalent to certain coquaternionic extensions of Hermitian quantum theories. One of the interesting consequences is that the spacetime dimension of these systems is six, not four, on account of the structures of coquaternionic quantum mechanics.

A quantum navigation problem concerns the identification of a time-optimal Hamiltonian that realizes a required quantum process or task, under the influence of a prevailing 'background' Hamiltonian that cannot be manipulated. When the task is to transform one quantum state into another, finding the solution in closed form to the problem is nontrivial even in the case of time-independent Hamiltonians. An elementary solution, based on trigonometric analysis, is found here when the Hilbert space dimension is two. Difficulties arising from generalizations to higher-dimensional systems are discussed.

A general prescription for the treatment of constrained quantum motion is outlined. We consider in particular constraints defined by algebraic submanifolds of the quantum state space. The resulting formalism is applied to obtain solutions to the constrained dynamics of systems of multiple spin 1 2 particles. When the motion is constrained to a certain product space containing all of the energy eigenstates, the dynamics thus obtained are quasi-unitary in the sense that the equations of motion take a form identical to that of unitary motion, but with different boundary conditions. When the constrained subspace is a product space of disentangled states, the associated motion is more intricate. Nevertheless, the equations of motion satisfied by the dynamical variables are obtained in closed form.

For nearly two decades, much research has been carried out on properties of physical systems described by Hamiltonians that are not Hermitian in the conventional sense, but are symmetric under space-time reflection; that is, they exhibit PT symmetry. Such Hamiltonians can be used to model the behavior of closed quantum systems, but they can also be replicated in open systems for which gain and loss are carefully balanced, and this has been implemented in laboratory experiments for a wide range of systems. Motivated by these ongoing research activities, we investigate here a particular theoretical aspect of the subject by unraveling the geometric structures of Hilbert spaces endowed with the parity and time-reversal operations, and analyze the characteristics of PT-symmetric Hamiltonians. A canonical relation between a PT-symmetric operator and a Hermitian operator is established in a geometric setting. 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. Positive definiteness of the norm can be restored by introducing a conjugation operator C; this leads to a positive-definite inner product in terms of CPT conjugation.

This paper analyses the mathematical properties of some unusual quantum states that are constructed by inserting an impenetrable barrier into a chamber confining a single particle. If the barrier is inserted at a fixed node of the wave function, then the energy of the system is unchanged. After barrier insertion, a measurement is made on one side of the chamber to determine if the particle is physically present. The measurement causes the wave function to collapse, and the energy contained in the subchamber where the particle is not present transfers instantaneously to the other subchamber where the particle now exists. This thought experiment constitutes an elementary example of an Einstein-Podolsky-Rosen experiment based on energy conservation rather than momentum or angular-momentum conservation. A more interesting situation arises when one inserts the barrier at a point that is not a fixed node of the wave function because this process changes the energy of the system; the faster the barrier is inserted, the greater the change in the energy. At the point of a sudden insertion the energy density becomes infinite; this energy instantly propagates across the subchamber and causes the wave function to become fractal. If an energy measurement is carried out on such a fractal wave function, the resulting mixed state has finite non-zero entropy. Fractal mixed states having unbounded entropy are also constructed and their properties are discussed. For a finite time insertion of the barrier, Landauer's principle is shown to be insufficient to resolve the apparent violation of the second law of thermodynamics that arises when a Maxwell demon is present. This problem is resolved by calculating the energy required to insert the barrier.

A quantum microcanonical postulate is proposed as a basis for the equilibrium properties of small quantum systems. Expressions for the corresponding density of states are derived, and are used to establish the existence of phase transitions for finite quantum systems. A grand microcanonical ensemble is introduced, which can be used to obtain new rigorous results in quantum statistical mechanics.

The second partial derivative of a European-style vanilla option with respect to the current price of the underlying asset-the option gamma-defines a probability density function for the current underlying price. By use of entropy maximization it is possible to obtain an option gamma, from which the associated option pricing formula can be recovered by integration. A number of pricing formulae are obtained in this manner, corresponding to different specifications of the constraints. When the available market information consists solely of a set of traded option prices, the entropic formulation leads to a model-independent calibration procedure. The result thus obtained also allows one to recover the relevant Greeks.

Wigner's theorem asserts that an isometric (probability conserving) transformation on a quantum state space must be generated by a Hamiltonian that is Hermitian. It is shown that when the hermiticity condition on the Hamiltonian is relaxed, we obtain the following complex generalization of Wigner's theorem: a holomorphically projective (complex geodesic curves preserving) transformation on a quantum state space must be generated by a Hamiltonian that is not necessarily Hermitian.

In a recent paper Jones and Mateo used operator techniques to show that the non-Hermitian PT-symmetric wrong-sign quartic Hamiltonian H =1/2 p(2)-gx(4) has the same spectrum as the conventional Hermitian Hamiltonian (H) over tilde = 1/2p(2) + 4gx(4) -root 2gx. Here, this equivalence is demonstrated very simply by means of differential-equation techniques and, more importantly, by means of functional-integration techniques. It is shown that the linear term in the Hermitian Hamiltonian is anomalous; that is, this linear term has no classical analog. The anomaly arises because of the broken parity symmetry of the original non-Hermitian PT-symmetric Hamiltonian. This anomaly in the Hermitian form of a PT-symmetric quartic Hamiltonian is unchanged if a harmonic term is introduced into H. When there is a harmonic term, an immediate physical consequence of the anomaly is the appearance of bound states; if there were no anomaly term, there would be no bound states. Possible extensions of this work to -phi(4) quantum field theory in higher-dimensional space-time are discussed.

A new energy-based stochastic extension of the Schrödinger equation for which the wave function collapses after the passage of a finite amount of time is proposed. An exact closed-form solution to the dynamical equation, valid for all finite-dimensional quantum systems, is presented and used to verify explicitly that reduction of the state vector to an energy eigenstate occurs. A time-change technique is introduced to construct a “clock” variable that relates the asymptotic and the finite-time collapse models by means of a nonlinear transformation.

The information contained within this book was originally based on a National Science Foundation CAREER award to study the relationship between wetland alteration and coastal watershed flooding. Over the past six years, as dozens of colleagues, graduate and undergraduate students, and postdocs participated in the research, the scope of the project broadened to take on a more comprehensive look at flooding, flood impacts, and their policy implications. By bringing together multiple datasets and analyses, we aim to provide the reader with an evidence-based understanding of the degree to which flooding affects people's lives and the opportunities available to mitigate flooding impacts. To that end, we combine concepts, case studies, and statistical models to construct an overall vision of how to mitigate flood problems in the future. We focus our empirical study on Texas and Florida, but hope the findings and lessons learned throughout these pages can inform those based in other places.While this book is scholarly in nature, it contains information useful to a broad audience, from those working in federal, state, and local government offices, to residents who have experienced flooding in their communities. Readers who do not wish to be overly burdened with understanding statistical procedures and relationships may skip to the summary sections at the end of each chapter, or to the policy recommendations presented at the conclusion of the book.

The Riemann zeta function Ϛ(s) is defined as the infinite sum ∑∞n=1n-s, which converges when Re s ˃ 1. The Riemann hypothesis asserts that the nontrivial zeros of Ϛ(s) lie on the line Re s = ½ . Thus, to find these zeros it is necessary to perform an analytic continuation to a region of complex s for which the defining sum does not converge. This analytic continuation is ordinarily performed by using a functional equation. In this paper it is argued that one can investigate some properties of the Riemann zeta function in the region Re s ˂ 1 by allowing operator-valued zeta functions to act on test functions. As an illustration, it is shown that the locations of the trivial zeros can be determined purely from a Fourier series, without relying on an explicit analytic continuation of the functional equation satisfied by Ϛ(s).

For nearly two decades, much research has been carried out on properties of physical systems described by Hamiltonians that are not Hermitian in the conventional sense, but are symmetric under space-time reflection; that is, they exhibit PT symmetry. Such Hamiltonians can be used to model the behavior of closed quantum systems, but they can also be replicated in open systems for which gain and loss are carefully balanced, and this has been implemented in laboratory experiments for a wide range of systems. Motivated by these ongoing research activities, we investigate here a particular theoretical aspect of the subject by unraveling the geometric structures of Hilbert spaces endowed with the parity and time-reversal operations, and analyze the characteristics of PT -symmetric Hamiltonians. A canonical relation between a PT -symmetric operator and a Hermitian operator is established in a geometric setting. 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. Positive definiteness of the norm can be restored by introducing a conjugation operator C ; this leads to a positive-definite inner product in terms of CPT conjugation.

In certain circumstances tools of Riemannian geometry are sufficient to address questions arising in the more general Finslerian context. We show that one such instance presents itself in the characterisation of geodesics in Randers spaces of constant flag curvature. To achieve a simple, Riemannian derivation of this special family of curves, we exploit the connection between Randers spaces and the Zermelo problem of time-optimal navigation in the presence of background fields. The characterisation of geodesics is then proven by generalising an intuitive argument developed recently for the solution of the quantum Zermelo problem.

The differential-equation eigenvalue problem associated with a recently-introduced Hamiltonian, whose eigenvalues correspond to the zeros of the Riemann zeta function, is analyzed using Fourier and WKB analysis. The Fourier analysis leads to a challenging open problem concerning the formulation of the eigenvalue problem in the momentum space. The WKB analysis gives the exact asymptotic behavior of the eigenfunction.

The quantum navigation problem of finding the time-optimal control Hamiltonian that transports a given initial state to a target state through quantum wind, that is, under the influence of external fields or potentials, is analyzed. By lifting the problem from the state space to the space of unitary gates realizing the required task, we are able to deduce the form of the solution to the problem by deriving a universal quantum speed limit. The expression thus obtained indicates that further simplifications of this apparently difficult problem are possible if we switch to the interaction picture of quantum mechanics. A complete solution to the navigation problem for an arbitrary quantum system is then obtained, and the behaviour of the solution is illustrated in the case of a two-level system.

A model for the thermodynamics of a quantum heat bath is introduced. Under the assumption that the bath molecules have finitely many degrees of freedom and are weakly interacting, we present a general derivation of the equation of state of the bath in the thermodynamic limit. The relation between the temperature and the specific energy of the bath depends on (i) the spectral properties of the molecules, and (ii) the choice of probability measure on the state space of a representative molecule. The results obtained illustrate how the microscopic features of the molecular constituents determine the macroscopic thermodynamic properties of the bath. Our findings can thus be used to compare the merits of different hypotheses for the equilibrium states of quantum systems. Two examples of plausible choices for the probability measure are considered in detail.

In recent reports, suggestions have been put forward to the effect that parity and time-reversal (PT) symmetry in quantum mechanics is incompatible with causality. It is shown here, in contrast, that PT-symmetric quantum mechanics is fully consistent with standard quantum mechanics. This follows from the surprising fact that the much-discussed metric operator on Hilbert space is not physically observable. In particular, for closed quantum systems in finite dimensions there is no statistical test that one can perform on the outcomes of measurements to determine whether the Hamiltonian is Hermitian in the conventional sense, or PT-symmetric—the two theories are indistinguishable. Nontrivial physical effects arising as a consequence of PT symmetry are expected to be observed, nevertheless, for open quantum systems with balanced gain and loss.

Stochastic Schrödinger equations that govern the dynamics of open quantum systems are given by the equations for signal processing. In particular, the Brownian motion that drives the wave function of the system does not represent noise, but provides purely the arrival of new information. Thus the wave function is guided by the optimal signal detection about the conditions of the environments under noisy observations. This behaviour is similar to biological systems that detect environmental cues, process this information, and adapt to them optimally by minimising uncertainties about the conditions of their environments. It is postulated that information-processing capability is a fundamental law of nature, and hence that models describing open quantum systems can equally be applied to biological systems to model their dynamics. For illustration, simple stochastic models are considered to capture heliotropic and gravitropic motions of plants. The advantage of such dynamical models is that it allows for the quantification of information processed by the plants. By considering the consequence of information erasure, it is argued that biological systems can process environmental signals relatively close to the Landauer limit of computation, and that loss of information must lie at the heart of ageing in biological systems.