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The Black & Scholes formula for theoretical pricing of options exhibits certain systematic biases, as observed prices in the market differs from the formula. A number of studies attempted to reduce these biases by incorporating a correction mechanism in the input data. Amongst non-parametric approaches used to improve accuracy of the model, Artificial Neural Networks are found as a promising alternative. The study made an attempt to improve accuracy of option price estimation using Artificial Neural Networks where all input parameters are adjusted by suitable multipliers. The values of these multipliers were determined using known data that minimises errors in valuation. The study was carried out using Nifty call option prices quoted on National Stock Exchange for the period 01-Jul 2008 to 30-Jun-11 covering three years.
Prof. S. K. Mitra. 1970. \u201cAn Option Pricing Model That Combines Neural Network Approach and Black Scholes Formula\u201d. Unknown Journal GJCST Volume 12 (GJCST Volume 12 Issue 4): .
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Total Score: 106
Country: India
Subject: Uncategorized
Authors: Dr. S. K.Mitra (PhD/Dr. count: 1)
View Count (all-time): 135
Total Views (Real + Logic): 20797
Total Downloads (simulated): 10920
Publish Date: 1970 01, Thu
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The Black & Scholes formula for theoretical pricing of options exhibits certain systematic biases, as observed prices in the market differs from the formula. A number of studies attempted to reduce these biases by incorporating a correction mechanism in the input data. Amongst non-parametric approaches used to improve accuracy of the model, Artificial Neural Networks are found as a promising alternative. The study made an attempt to improve accuracy of option price estimation using Artificial Neural Networks where all input parameters are adjusted by suitable multipliers. The values of these multipliers were determined using known data that minimises errors in valuation. The study was carried out using Nifty call option prices quoted on National Stock Exchange for the period 01-Jul 2008 to 30-Jun-11 covering three years.
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