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Quantum impact and the supply-demand curve.

David Orrell1

  • 1SystemsForecasting, Toronto, Canada.

Philosophical Transactions. Series A, Mathematical, Physical, and Engineering Sciences
|November 27, 2025
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Summary

This study models asset pricing using quantum probability, offering a new approach to the law of supply and demand. It establishes a relationship between price change and volatility, with implications for financial markets.

Keywords:
entropic forceprice impactquantum economicsquantum financequantum harmonic oscillatorsupply and demand

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Area of Science:

  • Quantitative Finance
  • Economic Modeling
  • Quantum Mechanics

Background:

  • The neoclassical law of supply and demand lacks empirical support due to the difficulty in separating supply and demand in practice.
  • Price impact, where large transactions alter asset prices, is a well-studied area in finance.
  • Existing models may not fully capture market dynamics under perturbations.

Purpose of the Study:

  • To develop a probabilistic model for price impact in asset pricing.
  • To extend this model to address the general law of supply and demand.
  • To explore the relationship between price change and volatility using empirical data.

Main Methods:

  • Simulation of economic buy/sell decisions using classical probability.
  • Development of a quantum probabilistic model to better represent system responses to perturbations.
  • Application of the derived formula to empirical stock market data.

Main Results:

  • A novel probabilistic model for price impact in asset pricing.
  • An extension of the model to encompass supply and demand dynamics.
  • Empirical validation of a derived relationship between price change and volatility.

Conclusions:

  • The quantum probabilistic approach provides a more robust framework for understanding market behavior than traditional models.
  • The findings have potential applications in option pricing, real estate, and other financial domains.
  • This work bridges quantum theory with economic decision-making models.