Artikel
Deep local volatility
Deep learning for option pricing has emerged as a novel methodology for fast computations with applications in calibration and computation of Greeks. However, many of these approaches do not enforce any no-arbitrage conditions, and the subsequent local volatility surface is never considered. In this article, we develop a deep learning approach for interpolation of European vanilla option prices which jointly yields the full surface of local volatilities. We demonstrate the modification of the loss function or the feed forward network architecture to enforce (hard constraints approach) or favor (soft constraints approach) the no-arbitrage conditions and we specify the experimental design parameters that are needed for adequate performance. A novel component is the use of the Dupire formula to enforce bounds on the local volatility associated with option prices, during the network fitting. Our methodology is benchmarked numerically on real datasets of DAX vanilla options.
- Sprache
-
Englisch
- Erschienen in
-
Journal: Risks ; ISSN: 2227-9091 ; Volume: 8 ; Year: 2020 ; Issue: 3 ; Pages: 1-18 ; Basel: MDPI
- Klassifikation
-
Wirtschaft
- Thema
-
option pricing
neural networks
no-arbitrage
local volatility
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Chataigner, Marc
Crépey, Stéphane
Dixon, Matthew F.
- Ereignis
-
Veröffentlichung
- (wer)
-
MDPI
- (wo)
-
Basel
- (wann)
-
2020
- DOI
-
doi:10.3390/risks8030082
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- Chataigner, Marc
- Crépey, Stéphane
- Dixon, Matthew F.
- MDPI
Entstanden
- 2020
Ähnliche Objekte (12)
Deep hedging under rough volatility
Volatility spillovers among cryptocurrencies
How does the volatility of volatility depend on volatility?
Investigating spillover effects between foreign exchange rate volatility and commodity price volatility in Uganda
Private sector credit and inflation volatility
Volatility forecast in crises and expansions
News-driven expectations and volatility clustering
A Bayesian semiparametric realized stochastic volatility model
Asymmetry and leverage in conditional volatility models
Selection criteria in regime switching conditional volatility models
Forecast Bitcoin volatility with least squares model averaging
Effect of variance swap in hedging volatility risk
Deep hedging under rough volatility
Volatility spillovers among cryptocurrencies
How does the volatility of volatility depend on volatility?
Investigating spillover effects between foreign exchange rate volatility and commodity price volatility in Uganda
Private sector credit and inflation volatility
Volatility forecast in crises and expansions
News-driven expectations and volatility clustering
A Bayesian semiparametric realized stochastic volatility model
Asymmetry and leverage in conditional volatility models
Selection criteria in regime switching conditional volatility models
Forecast Bitcoin volatility with least squares model averaging
Effect of variance swap in hedging volatility risk
Deep hedging under rough volatility
Volatility spillovers among cryptocurrencies
How does the volatility of volatility depend on volatility?
Investigating spillover effects between foreign exchange rate volatility and commodity price volatility in Uganda
Private sector credit and inflation volatility
Volatility forecast in crises and expansions
News-driven expectations and volatility clustering
A Bayesian semiparametric realized stochastic volatility model
Asymmetry and leverage in conditional volatility models
Selection criteria in regime switching conditional volatility models
Forecast Bitcoin volatility with least squares model averaging