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comment by Devac
Devac  ·  1630 days ago  ·  link  ·    ·  parent  ·  post: 17 equations that changed the world

    As for Black-Scholes, it's a different form of differential equation than Schrodinger's, so the functions that are solutions to each are quite different.

Both classify as parabolic when considered as time-dependent PDE, so there's a mutual similarity to the heat equation and its solutions.





am_Unition  ·  1630 days ago  ·  link  ·  

Thanks for that, makes sense.

I must be forgetting why the Schrodinger eq'n is non-dispersive, like why there isn't some first order spatial derivative, similar to the second term of this form of Black-Scholes. I think it's some assumption baked into a particular physical situation. Closed boundary conditions or something, right? It's been too long.

Devac  ·  19 days ago  ·  link  ·  

Holy thread necromancy, Batman!

    why the Schrodinger eq'n is non-dispersive

That's because it preserves total probability even under time-evolution operator (norm conservation works in both cases). Evolution over imaginary axis (ih-bar) means that the energy is redistributed, but not lost, as solution phase-space is conserved. That's the same as being 'non-dissipative.'