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Newton Raphson Emulation Network for Highly Efficient Computation of Numerous Implied Volatilities

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  • Geon Lee
  • Tae-Kyoung Kim
  • Hyun-Gyoon Kim
  • Jeonggyu Huh

Abstract

In finance, implied volatility is an important indicator that reflects the market situation immediately. Many practitioners estimate volatility using iteration methods, such as the Newton--Raphson (NR) method. However, if numerous implied volatilities must be computed frequently, the iteration methods easily reach the processing speed limit. Therefore, we emulate the NR method as a network using PyTorch, a well-known deep learning package, and optimize the network further using TensorRT, a package for optimizing deep learning models. Comparing the optimized emulation method with the NR function in SciPy, a popular implementation of the NR method, we demonstrate that the emulation network is up to 1,000 times faster than the benchmark function.

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  • Geon Lee & Tae-Kyoung Kim & Hyun-Gyoon Kim & Jeonggyu Huh, 2022. "Newton Raphson Emulation Network for Highly Efficient Computation of Numerous Implied Volatilities," Papers 2210.15969, arXiv.org.
    • Handle: RePEc:arx:papers:2210.15969
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    References listed on IDEAS

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    1. Higham,Desmond J., 2004. "An Introduction to Financial Option Valuation," Cambridge Books, Cambridge University Press, number 9780521547574.
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