The Case of Deep Learning for Option Pricing

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The Case of Deep Learning for Option Pricing

Messagepar Maw » 22 Mars 2019, 15:12

C'est dans l'air du temps, alors un papier sur le sujet du Deep learning appliqué au pricing des options.

Modern advancements in mathematical analysis, computational hardwareand software, and availability of big data have made possible commoditized ma-chines that can learn to operate as investment managers, financial analysts, andtraders. We briefly survey how and why AI and deep learning can influence thefield of Finance in a very general way. Revisiting original work from the 1990s,we summarize a framework within which machine learning may be used forfinance, with specific application to option pricing. We train a fully-connectedfeed-forward deep learning neural network to reproduce the Black and Scholes(1973) option pricing formula to a high degree of accuracy. We also offer abrief introduction to neural networks and some detail on the various choices ofhyper-parameters that make the model as accurate as possible. This exercisesuggests that deep learning nets may be used to learn option pricing modelsfrom the markets, and could be trained to mimic option pricing traders whospecialize in a single stock or index.

Machine Learning in Finance:The Case of Deep Learning for Option Pricing
Robert Culkin & Sanjiv R. DasSanta Clara University∗August 2, 2017
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