Title: Formulation of a rational option pricing model using artificial neural networks

Authors: Kaustubh Yadav

Addresses: School of Computer Science and Engineering, Vellore Institute of Technology, Vellore, Tamil Nadu, India

Abstract: This paper inquires on the options pricing modeling using artificial neural networks to price Apple's European call options. The model is based on the premise that ANNs can be used as functional approximators and used as an alternative to the numerical methods to some extent, for a viable and faster solution. We evaluate our predictions using the existing numerical solutions for the same, the analytic solution for the Black-Scholes equation, COS-model for Heston's stochastic volatility model and standard Heston-quasi analytic formula. The aim of this study is to find a viable time-efficient alternative to existing quantitative models for option pricing.

Keywords: Black-Scholes equation; Heston model calibration; option pricing; stochastic processes; artificial neural networks.

DOI: 10.1504/IJBDI.2021.118753

International Journal of Big Data Intelligence, 2021 Vol.8 No.1, pp.67 - 75

Received: 21 Dec 2020
Accepted: 30 Jan 2021

Published online: 25 Oct 2021 *

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