Valuing and Hedging American Put Options Using Neural Networks

@inproceedings{Kelly1994ValuingAH,
  title={Valuing and Hedging American Put Options Using Neural Networks},
  author={David L. Kelly and Jamsheed Shorish},
  year={1994}
}
  • David L. Kelly, Jamsheed Shorish
  • Published 1994
We use a neural network to non-parametrically estimate the market valuation function for American put options with real data. The neural network valuation function is twice di erentiable, and provides an instantaneous approximation of the American put option using a set of multiple state variables. We use the neural network valuation function to form hedged portfolios for American put options against changes in the stock price, the delta of the stock price, and interest rate. 

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