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Robust Artificial Neural Networks for Pricing of European Options

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  • Panayiotis Andreou
  • Chris Charalambous

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  • Spiros Martzoukos
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    File URL: http://hdl.handle.net/10.1007/s10614-006-9030-x
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    Bibliographic Info

    Article provided by Society for Computational Economics in its journal Computational Economics.

    Volume (Year): 27 (2006)
    Issue (Month): 2 (May)
    Pages: 329-351

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    Handle: RePEc:kap:compec:v:27:y:2006:i:2:p:329-351

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    Related research

    Keywords: artificial neural networks; huber function; implied parameters; option pricing & trading; robust estimation;

    References

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    1. Ederington, Louis & Guan, Wei, 2005. "The information frown in option prices," Journal of Banking & Finance, Elsevier, vol. 29(6), pages 1429-1457, June.
    2. 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 637-54, May-June.
    3. Franses, Philip Hans & Kloek, Teun & Lucas, Andre, 1998. "Outlier robust analysis of long-run marketing effects for weekly scanning data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 293-315, November.
    4. 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 851-89, July.
    5. Bates, David S., 2003. "Empirical option pricing: a retrospection," Journal of Econometrics, Elsevier, vol. 116(1-2), pages 387-404.
    6. 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.
    7. Black, Fischer & Scholes, Myron S, 1972. "The Valuation of Option Contracts and a Test of Market Efficiency," Journal of Finance, American Finance Association, vol. 27(2), pages 399-417, May.
    8. Bates, David S, 1996. "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 69-107.
    9. D. Michael Long & Dennis T. Officer, 1997. "The Relation Between Option Mispricing And Volume In The Black-Scholes Option Model," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(1), pages 1-12, 03.
    10. Ortelli, Claudio & Trojani, Fabio, 2005. "Robust efficient method of moments," Journal of Econometrics, Elsevier, vol. 128(1), pages 69-97, September.
    11. Bakshi, Gurdip & Cao, Charles & Chen, Zhiwu, 2000. "Pricing and hedging long-term options," Journal of Econometrics, Elsevier, vol. 94(1-2), pages 277-318.
    12. Krishnakumar, J. & Ronchetti, E., 1997. "Robust estimators for simultaneous equations models," Journal of Econometrics, Elsevier, vol. 78(2), pages 295-314, June.
    13. Lucy F. Ackert & Yisong S. Tian, 1999. "Efficiency in index options markets and trading in stock baskets," Working Paper 99-5, Federal Reserve Bank of Atlanta.
    14. Day, Theodore E. & Lewis, Craig M., 1988. "The behavior of the volatility implicit in the prices of stock index options," Journal of Financial Economics, Elsevier, vol. 22(1), pages 103-122, October.
    15. Canina, Linda & Figlewski, Stephen, 1993. "The Informational Content of Implied Volatility," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 659-81.
    16. Yao, Jingtao & Li, Yili & Tan, Chew Lim, 2000. "Option price forecasting using neural networks," Omega, Elsevier, vol. 28(4), pages 455-466, August.
    17. Galai, Dan, 1977. "Tests of Market Efficiency of the Chicago Board Options Exchange," The Journal of Business, University of Chicago Press, vol. 50(2), pages 167-97, April.
    18. Latane, Henry A & Rendleman, Richard J, Jr, 1976. "Standard Deviations of Stock Price Ratios Implied in Option Prices," Journal of Finance, American Finance Association, vol. 31(2), pages 369-81, May.
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    Cited by:
    1. Hannah Thinyane & Jonathan Millin, 2011. "An Investigation into the Use of Intelligent Systems for Currency Trading," Computational Economics, Society for Computational Economics, vol. 37(4), pages 363-374, April.
    2. Rua-Haun Tsaih & Hsiou-Wei Lin & Wen-Chyan Ke, 2014. "An Abductive-Reasoning Guide for Finance Practitioners," Computational Economics, Society for Computational Economics, vol. 43(4), pages 411-431, April.

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