Actuarial Science Seminar: Dieter Hendricks (11/03/2009)

This weeks seminar will be presented by Dieter Hendricks from Medscheme Health Risk Solutions.

Title of Presentation:
Investigating the use of Genetically Optimised Neural Networks to price European Call Options.

Abstract:
I have proposed an alternative options pricing model, using a customized Genetically Optimised Neural Network to price European call options on the All-Share Index. Although there is significant existing research in this domain, this is the first attempt at using this architecture to price deep in-the-money options based on a South African index, and I have proposed a unique transformation to facilitate this purpose. In this seminar, I will describe the construct and rationale behind connectionist architectures, and explore its applicability to the derivatives trading market. I investigated a number of network configurations and I will present the optimal network structure’s performance compared to the traditional Black-Scholes model, in terms of market consistency and out-of-sample performance. Surprising results emerged from my research, in that Neural Networks appear to offer superior accuracy for pricing in-the-money options, out-of-the-money options, as well as deep in-the-money options. Although the Black-Scholes closed-form solution may be preferred when its assumptions hold, Neural Networks offer a promising alternative in cases where markets are excessively volatile, or for more complex derivatives, where no closed-form solution exists.

Presenter:
Dieter Hendricks, Medscheme Health Risk Solutions, 2008 BBusSc graduate with first for research project

Time and date:
11 March 2009 1pm - 2pm

Venue:
LC2A The Nedbank Room

All welcome. For more information or details, please contact:

Zerina Matthews
Centre for Actuarial Research
Room 333.1 PD Hahn Building, Upper Campus
Tel: 021 650 5475
Fax: 021 650 5937

Posted 08/09/2009 by Zerina Matthews