Please use this identifier to cite or link to this item:
https://hdl.handle.net/20.500.14279/14562
Title: | Critical assessment of option pricing methods using Artificial Neural Networks |
Authors: | Andreou, Panayiotis Charalambous, Chris Martzoukos, Spiros H. |
Major Field of Science: | Social Sciences |
Field Category: | Economics and Business |
Keywords: | Economics;Neural networks;Electronic trading;Black-Scholes formula;Trading strategies;Federal Reserve;Risk assessment;Financial markets |
Issue Date: | 2002 |
Source: | Lecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics) Volume 2415 LNCS, 2002, Pages 1131-1136 |
Conference: | International Conference on Artificial Neural Networks |
Abstract: | In this paper we compare the predictive ability of the Black-Scholes Formula (BSF) and Artificial Neural Networks (ANNs) to price call options by exploiting historical volatility measures. We use daily data for the S&P 500 European call options and the underlying asset and furthermore, we employ nonlinearly interpolated risk-free interest rate from the Federal Reserve board for the period 1998 to 2000.Using the best models in each sub-period tested, our preliminary results demonstrate that by using historical measures of volatility, ANNs outperform the BSF.In addition, the ANNs performance improves even more when a hybrid ANN model is utilized. Our results are significant and differ from previous literature. Finally, we are currently extending the research in order to: a) incorporate appropriate implied volatility per contract with the BSF and ANNs and b) investigate the applicability of the models using trading strategies. |
URI: | https://hdl.handle.net/20.500.14279/14562 |
ISBN: | 978-354044074-1 |
ISSN: | 03029743 |
Rights: | © Springer-Verlag |
Type: | Conference Papers |
Affiliation : | University of Cyprus |
Publication Type: | Peer Reviewed |
Appears in Collections: | Δημοσιεύσεις σε συνέδρια /Conference papers or poster or presentation |
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