Pricing and Hedging American-Style Options with Deep Learning

@article{Becker2019PricingAH,
  title={Pricing and Hedging American-Style Options with Deep Learning},
  author={S. Becker and Patrick Cheridito and Arnulf Jentzen},
  journal={arXiv: Computational Finance},
  year={2019}
}
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… Expand

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