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A neural network versus Black-Scholes: a comparison of pricing and hedging performances

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  • Henrik Amilon

    (Department of Economics, Lund University, Sweden)

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  • Henrik Amilon, 2003. "A neural network versus Black-Scholes: a comparison of pricing and hedging performances," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 22(4), pages 317-335.
    • Handle: RePEc:jof:jforec:v:22:y:2003:i:4:p:317-335
    DOI: 10.1002/for.867
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    References listed on IDEAS

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    1. Hutchinson, James M & Lo, Andrew W & Poggio, Tomaso, 1994. "A Nonparametric Approach to Pricing and Hedging Derivative Securities via Learning Networks," Journal of Finance, American Finance Association, vol. 49(3), pages 851-889, July.
    2. Fitzenberger, Bernd, 1998. "The moving blocks bootstrap and robust inference for linear least squares and quantile regressions," Journal of Econometrics, Elsevier, vol. 82(2), pages 235-287, February.
    3. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    4. Garcia, Rene & Gencay, Ramazan, 2000. "Pricing and hedging derivative securities with neural networks and a homogeneity hint," Journal of Econometrics, Elsevier, vol. 94(1-2), pages 93-115.
    5. Timo Teräsvirta & Chien‐Fu Lin & Clive W. J. Granger, 1993. "Power Of The Neural Network Linearity Test," Journal of Time Series Analysis, Wiley Blackwell, vol. 14(2), pages 209-220, March.
    6. Rech, Gianluigi & Teräsvirta, Timo & Tschernig, Rolf, 1999. "A simple variable selection technique for nonlinear models," SSE/EFI Working Paper Series in Economics and Finance 296, Stockholm School of Economics, revised 06 Apr 2000.
    7. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    8. Scott, Louis O., 1987. "Option Pricing when the Variance Changes Randomly: Theory, Estimation, and an Application," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(4), pages 419-438, December.
    9. Chesney, Marc & Scott, Louis, 1989. "Pricing European Currency Options: A Comparison of the Modified Black-Scholes Model and a Random Variance Model," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(3), pages 267-284, September.
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    Cited by:

    1. Gradojevic Nikola, 2016. "Multi-criteria classification for pricing European options," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(2), pages 123-139, April.
    2. Yoshio Kajitani & A. Ian Mcleod & Keith W. Hipel, 2005. "Forecasting nonlinear time series with feed-forward neural networks: a case study of Canadian lynx data," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(2), pages 105-117.
    3. Maciej Wysocki & Robert Ślepaczuk, 2020. "Artificial Neural Networks Performance in WIG20 Index Options Pricing," Working Papers 2020-19, Faculty of Economic Sciences, University of Warsaw.
    4. Lahmiri, Salim, 2017. "Modeling and predicting historical volatility in exchange rate markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 387-395.
    5. Beatriz Salvador & Cornelis W. Oosterlee & Remco van der Meer, 2020. "Financial Option Valuation by Unsupervised Learning with Artificial Neural Networks," Mathematics, MDPI, vol. 9(1), pages 1-20, December.
    6. Alois Weigand, 2019. "Machine learning in empirical asset pricing," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 33(1), pages 93-104, March.
    7. Anindya Goswami & Sharan Rajani & Atharva Tanksale, 2020. "Data-Driven Option Pricing using Single and Multi-Asset Supervised Learning," Papers 2008.00462, arXiv.org, revised Dec 2020.
    8. Tseng, Chih-Hsiung & Cheng, Sheng-Tzong & Wang, Yi-Hsien & Peng, Jin-Tang, 2008. "Artificial neural network model of the hybrid EGARCH volatility of the Taiwan stock index option prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(13), pages 3192-3200.

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