History state formalism for time series with application to finance

Abstract:We present a method for analyzing general time series by employing the history state formalism of quantum mechanics. This formalism allows us to describe a complete evolution based on a single quantum state, the history state, which simultaneously includes -also as a quantum system- the reference clock. It naturally leads to the concept of system-time entanglement, with the ensuing entanglement entropy constituting a measure of the effective number of distinguishable states visited in the history. Through a quantum coherent state embedding of the time series data, it is then possible to associate a quantum history state to the series. The gaussian overlap between these coherent states provides thus a smooth measure of distinguishability between the series data. The eigenvalues of the corresponding overlap matrix determine in fact the entanglement spectrum and entropy of the history state, which provide a rigorous characterization of the evolution. As illustration, the formalism is applied to typical financial time-series data. Through the entanglement entropy and spectrum, different evolution regimes can be identified. Entanglement based volatility indicators are also derived, and compared with standard volatility measures.

arXiv:2603.12132 [quant-ph]

(or arXiv:2603.12132v3 [quant-ph] for this version)

https://doi.org/10.48550/arXiv.2603.12132 Focus to learn more arXiv-issued DOI via DataCite

https://doi.org/10.1103/xygw-mhp6 Focus to learn more DOI(s) linking to related resources

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