Corpus ID: 9528543

Gated Neural Networks for Option Pricing: Rationality by Design

@inproceedings{Yang2017GatedNN,
  title={Gated Neural Networks for Option Pricing: Rationality by Design},
  author={Yongxin Yang and Yu Zheng and Timothy M. Hospedales},
  booktitle={AAAI},
  year={2017}
}
We propose a neural network approach to price EU call options that significantly outperforms some existing pricing models and comes with guarantees that its predictions are economically reasonable. To achieve this, we introduce a class of gated neural networks that automatically learn to divide-and-conquer the problem space for robust and accurate pricing. We then derive instantiations of these networks that are 'rational by design' in terms of naturally encoding a valid call option surface… Expand
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