Pricing and hedging American-style options with deep learning

Code

• github.com/HeKrRuTe/OptStopRandNN
  pytorch★ 59

Abstract

In this paper we introduce a deep learning method for pricing and hedging American-style options. It first computes a candidate optimal stopping policy. From there it derives a lower bound for the price. Then it calculates an upper bound, a point estimate and confidence intervals. Finally, it constructs an approximate dynamic hedging strategy. We test the approach on different specifications of a Bermudan max-call option. In all cases it produces highly accurate prices and dynamic hedging strategies with small replication errors.

Tasks

Reproductions