Modeling Interest Rates with the Schrödinger Equation: A Quantum Leap in Finance

I remember attending a physics conference where a speaker casually mentioned using the Schrödinger equation, a cornerstone of quantum mechanics, to model something completely unexpected: interest rates. Initially, I was puzzled. How could a theory describing the behavior of subatomic particles possibly relate to the complex world of finance? This intriguing question sparked my curiosity and led me down a fascinating path of exploration, blending the seemingly disparate fields of quantum physics and financial modeling. Traditional interest rate models often struggle to capture the full complexity of market dynamics. This often leads to inaccurate predictions, especially during periods of high volatility or market crashes. I believe exploring unconventional approaches like applying the Schrödinger equation is not just an academic exercise but a potential avenue for building more robust and accurate financial models.

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Table of Contents

• The Schrödinger Equation and Finance: Bridging quantum mechanics and financial markets, exploring the theory behind using the Schrödinger equation for interest rate modeling.
• Constructing the Potential Function: Defining and implementing various potential functions in Python, visualizing their impact on interest rate dynamics.