NN-OPT: Neural Network for Option Pricing Using Multinomial Tree

摘要

We provide a framework for learning to price complex options by learning risk-neutral measures (Martingale measures). In a simple geometric Brownian motion model, the price volatility, fixed interest rate and a no-arbitrage condition suffice to determine a unique risk-neutral measure. On the other hand, in our framework, we relax some of these assumptions to obtain a class of allowable risk-neutral measures. We then propose a framework for learning the appropriate risk-neural measure. In particular, we provide an efficient algorithm for backpropa-gating gradients through multinomial pricing trees. Since the risk-neutral measure prices all options simultaneously, we can use all the option contracts on a particular stock for learning. We demonstrate the performance of these models on historical data. Finally, we illustrate the power of such a framework by developing a real time trading system based upon these pricing methods.