TITLE:
Derivatives Pricing via Machine Learning
AUTHORS:
Tingting Ye, Liangliang Zhang
KEYWORDS:
Machine Learning, Regression Analysis, Jump-Diffusion, Derivatives Pricing, Hilbert Space, Orthogonal Projection
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.9 No.3,
August
27,
2019
ABSTRACT: In this paper, we combine the theory of stochastic process and techniques of machine learning with the regression analysis, first proposed by [1] to solve for American option prices, and apply the new methodologies on financial derivatives pricing. Rigorous convergence proofs are provided for some of the methods we propose. Numerical examples show good applicability of the algorithms. More applications in finance are discussed in the Appendices.