Risk-Neutral Market Simulation

Magnus Wiese and Phillip Murray

Papers from arXiv.org

Abstract: We develop a risk-neutral spot and equity option market simulator for a single underlying, under which the joint market process is a martingale. We leverage an efficient low-dimensional representation of the market which preserves no static arbitrage, and employ neural spline flows to simulate samples which are free from conditional drifts and are highly realistic in the sense that among all possible risk-neutral simulators, the obtained risk-neutral simulator is the closest to the historical data with respect to the Kullback-Leibler divergence. Numerical experiments demonstrate the effectiveness and highlight both drift removal and fidelity of the calibrated simulator.

Date: 2022-02
New Economics Papers: this item is included in nep-cmp and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in AAAI 2022 Workshop on AI in Financial Services: Adaptiveness, Resilience & Governance

Downloads: (external link)
http://arxiv.org/pdf/2202.13996 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2202.13996

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().