Option Pricing Via Genetic Programming

  • Nemmara Chidambaran
  • Joaquin Triqueros
  • Chi-Wen Jevons Lee
Part of the Studies in Fuzziness and Soft Computing book series (STUDFUZZ, volume 100)


We propose a methodology of Genetic Programming to approximate the relationship between the option price, its contract terms and the properties of the underlying stock price. An important advantage of the Genetic Programming approach is that we can incorporate currently known formulas, such as the Black-Scholes model, in the search for the best approximation to the true pricing formula. Using Monte Carlo simulations, we show that the Genetic Programming model approximates the true solution better than the Black-Scholes model when stock prices follow a jump-diffusion process. We also show that the Genetic Programming model outperforms various other models when pricing options in the real world. Other advantages of the Genetic Programming approach include its low demand for data, and its computational speed.


Genetic Program Stock Price Stock Return Option Price Option Contract 
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 2002

Authors and Affiliations

  • Nemmara Chidambaran
    • 1
  • Joaquin Triqueros
    • 2
  • Chi-Wen Jevons Lee
    • 2
  1. 1.New York UniversityNew YorkUSA
  2. 2.Tulane UniversityNew OrleansUSA

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