Quantum Markets: Physical Theory of Market Microstructure

This book provides technical introduction into quantum nature of financial markets on microstructural level. Coming from examination of price formation process the book explains why it is a quantum process and why the common stochastic methods are insufficient. Building on this fact, quantum framework is developed as it applies to finance, not elementary particles. Although there is a basic similarity, the resulting picture is much different from traditional quantum physics. Quantum physics is known as a discipline of calculations, not philosophy. That style is maintained throughout the book. The book is most appropriate for institutional finance professionals who have formal education in physics. The book is not intended for individuals that are looking for a general read, are unfamiliar with physics concepts, or amateur traders. "Quantum Markets" summarizes years of author's own research prompted by the need to enhance quality of decision making in his asset management and trading work. This includes modeling price impact, block trade pricing, order book dynamics, risk management of illiquid securities, etc. Armed with the material of this book the readers should be able to apply it to solve quantitative problems on a trading desk or perform their own research in this direction. Readers with questions about Quantum Markets can ask their questions in biweekly live 15-minute online Q&A sessions. Session timeline is posted on author's webpage.