Neural Jumps for Option Pricing
Fuente:
arXiv
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| Autori principali: | , , , |
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| Natura: | Preprint |
| Pubblicazione: |
2025
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| _version_ | 1866909639519502336 |
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| author | Zheng, Duosi Guo, Hanzhong Liu, Yanchu Huang, Wei |
| author_facet | Zheng, Duosi Guo, Hanzhong Liu, Yanchu Huang, Wei |
| contents | Recognizing the importance of jump risk in option pricing, we propose a neural jump stochastic differential equation model in this paper, which integrates neural networks as parameter estimators in the conventional jump diffusion model. To overcome the problem that the backpropagation algorithm is not compatible with the jump process, we use the Gumbel-Softmax method to make the jump parameter gradient learnable. We examine the proposed model using both simulated data and S&P 500 index options. The findings demonstrate that the incorporation of neural jump components substantially improves the accuracy of pricing compared to existing benchmark models. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2506_05137 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Neural Jumps for Option Pricing Zheng, Duosi Guo, Hanzhong Liu, Yanchu Huang, Wei General Finance Recognizing the importance of jump risk in option pricing, we propose a neural jump stochastic differential equation model in this paper, which integrates neural networks as parameter estimators in the conventional jump diffusion model. To overcome the problem that the backpropagation algorithm is not compatible with the jump process, we use the Gumbel-Softmax method to make the jump parameter gradient learnable. We examine the proposed model using both simulated data and S&P 500 index options. The findings demonstrate that the incorporation of neural jump components substantially improves the accuracy of pricing compared to existing benchmark models. |
| title | Neural Jumps for Option Pricing |
| topic | General Finance |
| url | https://arxiv.org/abs/2506.05137 |