Pricing Options with Futures-Style Margining: A Genetic Adaptive Neural Network ApproachRoutledge, 2014 M02 4 - 224 pages This book examines the applicability of a relatively new and powerful tool, genetic adaptive neural networks, to the field of option valuation. A genetic adaptive neural network model is developed to price option contracts with futures-style margining. This model is capable of estimating complex, non-linear relationships without having prior knowledge of the specific nature of the relationships. Traditional option pricing models require that the researcher or practitioner specify the distribution of the underlying asset. In addition, the methodology is able to easily accommodate additional inputs(something that cannot be preformed with existing models. Since 1973, options on stock have been traded on organized exchanges in the United States. An option on a stock gives the option owner the right to buy or sell the stock for a pre-set price.. Since the introduction of stock options, the options market has experienced tremendous growth and has spawned even more exotic types of derivative securities. Obviously, valuing these securities is an issue of great importance to investors and hedgers in the financial marketplace. Existing pricing models produce systematic pricing errors and new models have to be developed for options with differing characteristics. The genetic adaptive neural network is found to provide more accurate valuation than a traditional option pricing model when applied to the 3-month Eurodollar futures-option contract traded on the London International Financial Futures and Options Exchange. |
Contents
Literature Review | 9 |
Methodology and Data | 65 |
Results | 115 |
Conclusions and Suggestions for Future | 187 |
Bibliography | 193 |
Author Index | 201 |
Other editions - View all
Pricing Options with Futures-style Margining: A Genetic Adaptive Neural ... A. Jay White Limited preview - 2000 |
Pricing Options with Futures-Style Margining: A Genetic Adaptive Neural ... Alan White Limited preview - 2014 |
PRICING OPTIONS WITH FUTURES-STYLE MARGINING: A Genetic Adaptive Neural ... ALAN. WHITE No preview available - 2016 |
Common terms and phrases
01 level 3-month Eurodollar futures ability to approximate American call American call option American options at-the-money calls B-S model binomial Black-Scholes bond BOPM BSCs OPM call and put call option price call price commodity continuous dividend deep in-the-money deep out-of-the-money degree of moneyness derivative securities early exercise equation Eurodollar futures contract European option exercise price expiration Figure Frequency Distribution futures contract futures options futures price futures rate futures-style margining futures-style options GANN approximation GANN's GANNs ability holdout sample implied volatilities increase interest rate futures LIFFE maturity Merton MSE and MAE observations option pricing model options on futures options with futures-style out-of-the-money puts portfolio presented in Table pricing biases put option prices put price regression rejected relationship risk-free rate simulated call simulated put simulation data set stock price strike price strike rate sub-samples training data set training sample volatility Wiener process Wilcoxon signed-ranks test