Price Measurement in Financial Markets and Quantum Coupled-Wave Model of Price Dynamics

We present a theory of bid and ask price dynamics in financial markets where the two prices form as a result of quantum-chaotic interaction between buy and sell orders. In this model the two prices are represented by eigenvalues of a 2x2 price operator corresponding to "bid" and "ask" eigenstates. We will present the trading process from physics point of view, discuss how each trade represents an elementary act of price measurement and demonstrate how the theory is built from this argument. We will show that the coupled-wave theory reflects important characteristics of bid and ask price dynamics and order density in the limit order book. Calibration examples will be provided for stocks at various time scales. This theory opens a new dimension in financial modeling providing a framework for liquidity pricing, illiquidity risk evaluation, position management, as well as brings up a discussion about the nature of processes in financial markets.