Machine learning solutions to challenges in finance: An application to the pricing of financial products

Gan，Lirong1; Wang，Huamao2; Yang，Zhaojun1

2020-04-01

10.1016/j.techfore.2020.119928

TECHNOLOGICAL FORECASTING AND SOCIAL CHANGE   影响因子和分区

0040-1625

1873-5509

The recent fast development of machine learning provides new tools to solve challenges in many areas. In finance, average options are popular financial products among corporations, institutional investors, and individual investors for risk management and investment because average options have the advantages of cheap prices and their payoffs are not very sensitive to the changes of the underlying asset prices at the maturity date, avoiding the manipulation of asset prices and option prices. The challenge is that pricing arithmetic average options requires traditional numerical methods with the drawbacks of expensive repetitive computations and non-realistic model assumptions. This paper proposes a machine-learning method to price arithmetic and geometric average options accurately and in particular quickly. The method is model-free and it is verified by empirical applications as well as numerical experiments.

Asian options Finance applications Financial technology Machine learning Model-free asset pricing

EI ; SSCI

英语

第一

Colleges Innovation Project of Guangdong[2018WTSCX131]

Business & Economics ; Public Administration

Business ; Regional & Urban Planning

WOS:000527366500036

Elsevier Inc.

20200408086297

Economics ; Investments ; Learning systems ; Machine learning ; Numerical methods ; Risk management

Cost and Value Engineering; Industrial Economics:911 ; Numerical Methods:921.6 ; Social Sciences:971

SOCIAL SCIENCES, GENERAL

2-s2.0-85078075210

Scopus

1.Department of Finance,Southern University of Science and Technology,China
2.Kent Business School,University of Kent,Canterbury,Kent CT2 7FS,United Kingdom

Gan，Lirong,Wang，Huamao,Yang，Zhaojun. Machine learning solutions to challenges in finance: An application to the pricing of financial products[J]. TECHNOLOGICAL FORECASTING AND SOCIAL CHANGE,2020,153.

Gan，Lirong,Wang，Huamao,&Yang，Zhaojun.(2020).Machine learning solutions to challenges in finance: An application to the pricing of financial products.TECHNOLOGICAL FORECASTING AND SOCIAL CHANGE,153.

Gan，Lirong,et al."Machine learning solutions to challenges in finance: An application to the pricing of financial products".TECHNOLOGICAL FORECASTING AND SOCIAL CHANGE 153(2020).