Search

• European option datasets were time-sequenced by maturity to extract time information. • Two deep learning models were built for the option pricing tasks. • Our models can price option accurately without volatility calibration and simulation. • An interpretable method was used to find how models improved the pricing results. • Accumulate local effect range method was proposed to get feature emphasis of models. In this paper, we investigated the feasibility of pricing European options with time-sequencing data processing method and deep learning models, based on two European options, the ETF50 options of China and the S&P 500 options of America. Four competing models were built to verify the improvement of the 1D-CNN and LSTM models on the option pricing task. Methods like cross-validations and statistical tests were also used to make our experiments more robust. Besides, in order to increase the stability and the interpretability of our pricing models, we selected the ALE method to interpret and analyze the behavior of the deep learning models. The empirical results indicate that, in both ETF50 option and S&P500 option pricing tasks, the 1D-CNN and LSTM models had significant advantages in forecasting accuracy and robustness under moneyness, trading date or maturity dimension irrespectively. Especially for the LSTM model, which has robust performance using different kinds of cross-validation methods. With the help of ALE method, we proved that the improved performance brought by the 1D-CNN and LSTM models could be attributed to their capability of capturing time-series information and their different emphasis on input features and lags. [ABSTRACT FROM AUTHOR]