Deep neural network framework based on backward stochastic differential equations for pricing and hedging American options in high dimensions

DOI10.1080/14697688.2020.1788219zbMath1479.91393arXiv1909.11532OpenAlexW3083828368WikidataQ115295384 ScholiaQ115295384MaRDI QIDQ5014169

Justin W. L. Wan, Yangang Chen

Publication date: 1 December 2021

Published in: Quantitative Finance (Search for Journal in Brave)

Full work available at URL: https://arxiv.org/abs/1909.11532

zbMATH Keywords

neural networkstochastic differential equationsAmerican optionsdelta hedging

Mathematics Subject Classification ID

Artificial neural networks and deep learning (68T07) Applications of stochastic analysis (to PDEs, etc.) (60H30) Stopping times; optimal stopping problems; gambling theory (60G40) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (10)

Overcoming the curse of dimensionality in the numerical approximation of parabolic partial differential equations with gradient-dependent nonlinearities ⋮ Approximations with deep neural networks in Sobolev time-space ⋮ Robust deep hedging ⋮ Perpetual cancellable American options with convertible features ⋮ On a Neural Network to Extract Implied Information from American Options ⋮ Efficient pricing and hedging of high-dimensional American options using deep recurrent networks ⋮ Learning the random variables in Monte Carlo simulations with stochastic gradient descent: Machine learning for parametric PDEs and financial derivative pricing ⋮ Deep learning algorithms for solving high-dimensional nonlinear backward stochastic differential equations ⋮ Overcoming the curse of dimensionality in the numerical approximation of backward stochastic differential equations ⋮ An overview on deep learning-based approximation methods for partial differential equations

Uses Software

• PMTK
• TensorFlow
• Adam
• DGM

Cites Work

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• The Minimal Entropy Martingale Measure and the Valuation Problem in Incomplete Markets

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