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Three-Layer Artificial Neural Network for Pricing Multi-Asset European Option

Authors :
Zhiqiang Zhou
Hongying Wu
Yuezhang Li
Caijuan Kang
You Wu
Source :
Mathematics, Vol 12, Iss 17, p 2770 (2024)
Publication Year :
2024
Publisher :
MDPI AG, 2024.

Abstract

This paper studies an artificial neural network (ANN) for multi-asset European options. Firstly, a simple three-layer ANN-3 is established with undetermined weights and bias. Secondly, the time–space discrete PDE of the multi-asset option is given and the corresponding discrete data are fed into the ANN-3. Then, using least squares error as the objective function, the weights and bias of ANN-3 are trained well. Numerical examples are carried out to confirm the stability, accuracy and efficiency. Experiments show the ANN’s relative error is about 0.8%. This method can be extended into multi-layer ANN-q(q>3) and extended into American options.

Details

Language :
English
ISSN :
22277390
Volume :
12
Issue :
17
Database :
Directory of Open Access Journals
Journal :
Mathematics
Publication Type :
Academic Journal
Accession number :
edsdoj.545144329a748c3bc370ddc9ee65c50
Document Type :
article
Full Text :
https://doi.org/10.3390/math12172770