Newton Raphson Emulation Network for Highly Efficient Computation of Numerous Implied Volatilities

Geon Lee, Tae-Kyoung Kim, Hyun-Gyoon Kim and Jeonggyu Huh

Papers from arXiv.org

Abstract: In finance, implied volatility is an important indicator that reflects the market situation immediately. Many practitioners estimate volatility using iteration methods, such as the Newton--Raphson (NR) method. However, if numerous implied volatilities must be computed frequently, the iteration methods easily reach the processing speed limit. Therefore, we emulate the NR method as a network using PyTorch, a well-known deep learning package, and optimize the network further using TensorRT, a package for optimizing deep learning models. Comparing the optimized emulation method with the NR function in SciPy, a popular implementation of the NR method, we demonstrate that the emulation network is up to 1,000 times faster than the benchmark function.

Date: 2022-10
New Economics Papers: this item is included in nep-big, nep-cmp, nep-net and nep-rmg
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