Research on Factors Influencing European Option Price by Using Hybrid Neural Network

Conference paper
Part of the Advances in Intelligent and Soft Computing book series (AINSC, volume 144)

Abstract

According to European option pricing models such as the Black-Scholes model, option price is determined by five factors which are underlying asset price, striking price, interest rate, maturity, and volatility. Gross open interest reflects the activity of the transaction traded by the buyers and sellers in option markets. Several different kinds of gross open interest are used as the input variables of the neural networks in this work. The experimental results show that the hybrid neural network model using a kind of average gross open interest as the input variable performs better than the other models put forward in this article. It may hints that the activity of an option market could be one of the factors influencing European option price.

Keywords

Interest Rate Option Price Mean Absolute Percentage Error Call Option Forecast Result 
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 GmbH Berlin Heidelberg 2012

Authors and Affiliations

  1. 1.Wang Yanan Institute for Studies in EconomicsXiamen UniversityXiamenChina

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