Neural Networks for Option Pricing and Hedging: A Literature Review
Journal of Computational Finance
32 Pages Posted: 25 Nov 2019 Last revised: 11 May 2020
Date Written: November 13, 2019
Neural networks have been used as a nonparametric method for option pricing and hedging since the early 1990s. Far over a hundred papers have been published on this topic. This note intends to provide a comprehensive review. Papers are compared in terms of input features, output variables, benchmark models, performance measures, data partition methods, and underlying assets. Furthermore, related work and regularisation techniques are discussed.
Keywords: Neural network, Option pricing, Option hedging, Survey
JEL Classification: G13, C45
Suggested Citation: Suggested Citation