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- Title
An Artificial Intelligence Approach to the Valuation of American-Style Derivatives: A Use of Particle Swarm Optimization.
- Authors
Ren-Raw Chen; Huang, Jeffrey; Huang, William; Yu, Robert
- Abstract
In this paper, we evaluate American-style, path-dependent derivatives with an artificial intelligence technique. Specifically, we use swarm intelligence to find the optimal exercise boundary for an American-style derivative. Swarm intelligence is particularly efficient (regarding computation and accuracy) in solving high-dimensional optimization problems and hence, is perfectly suitable for valuing complex American-style derivatives (e.g., multiple-asset, path-dependent) which require a high-dimensional optimal exercise boundary.
- Subjects
MONTE Carlo method; PARTICLE swarm optimization; ARTIFICIAL intelligence; SWARM intelligence; VALUATION
- Publication
Journal of Risk & Financial Management, 2021, Vol 14, Issue 2, p1
- ISSN
1911-8066
- Publication type
Article
- DOI
10.3390/jrfm14020057