An Artificial Intelligence Approach to the Valuation of American-Style Derivatives: A Use of Particle Swarm Optimization
Open Access
- 2 February 2021
- journal article
- research article
- Published by MDPI AG in Journal of Risk and Financial Management
- Vol. 14 (2) , 57
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.Keywords
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