Pricing Exotic Derivatives Using Regret Minimization

  • Eyal Gofer
  • Yishay Mansour
Part of the Lecture Notes in Computer Science book series (LNCS, volume 6982)

Abstract

We price various financial instruments, which are classified as exotic options, using the regret bounds of an online algorithm. In addition, we derive a general result, which upper bounds the price of any derivative whose payoff is a convex function of the final asset price. The market model used is adversarial, making our price bounds robust. Our results extend the work of [9], which used regret minimization to price the standard European call option, and demonstrate the applicability of regret minimization to derivative pricing.

Keywords

Stock Price Option Price Portfolio Selection Online Algorithm Call Option 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Eyal Gofer
    • 1
  • Yishay Mansour
    • 1
  1. 1.Tel Aviv UniversityTel AvivIsrael

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