An Adaptive Evolutionary Approach to Option Pricing via Genetic Programming

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@TechReport{wpa98086,
  author =       "N. K. Chidambaran and Chi-Wen {Jevons Lee} and 
                 Joaquin R. Trigueros",
  title =        "An Adaptive Evolutionary Approach to Option Pricing
                 via Genetic Programming",
  institution =  "Leonard N. Stern School of Buisness, New York
                 University",
  year =         "1998",
  type =         "Working paper",
  number =       "FIN-98-086",
  month =        nov,
  keywords =     "genetic algorithms, genetic programming",
  URL =          "http://www.stern.nyu.edu/fin/workpapers/wpa98086.pdf",
  abstract =     "We propose a methodology of Genetic Programming to
                 approximate the relationship between the option price,
                 its contract terms and the properties of the underlying
                 stock price. An important advantage of the Genetic
                 Programming approach is that we can incorporate
                 currently known formulas, such as the Black-Scholes
                 model, in the search for the best approximation to the
                 true pricing formula. Using Monte Carlo simulations, we
                 show that the Genetic Programming model approximates
                 the true solution better than the Black-Scholes model
                 when stock prices folow a jump-diffusion process. We
                 also show that the Genetic Programming model
                 outperforms various other models in many different
                 settings. Other advantages of the Genetic Programming
                 approach include its robustness to changing
                 environment, its low demand for data, and its
                 computational speed. Since genetic programs are
                 flexible, self-learning and sefl-improving, they are an
                 ideal tool for practitioners.",
  notes =        "see also \cite{chidambaran:1998:aeaopGP} and
                 \cite{chidambaran:2002:ECEF}",
  size =         "48 pages",
}

Genetic Programming entries for N K Chidambaran Chi-Wen Jevons Lee Joaquin R Trigueros

Citations