Artificial Neural Network Enhanced Parametric Option Pricing

Panayiotis C. Andreou, Chris Charalambous and Spiros H. Martzoukos
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Panayiotis C. Andreou: University of Cyprus
Chris Charalambous: University of Cyprus

No 118, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: In this paper we explore ways that alleviate problems of nonparametric (artificial neural networks) and parametric option pricing models by combining the two. The resulting enhanced network model is compared to standard artificial neural networks and to parametric models with several historical and implied parameters. Empirical results using S\&P 500 index call options strongly support our approach.

Keywords: Option pricing; implied volatilities; implied parameters; artificial neural networks; optimization (search for similar items in EconPapers)
JEL-codes: G13 G14 (search for similar items in EconPapers)
Date: 2006-07-04
New Economics Papers: this item is included in nep-cfn, nep-cmp, nep-ets, nep-fin, nep-mic and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:118

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