Option pricing using Particle Swarm Optimization

Authors:
Girish K. Jha;Sameer Kumar;Hari Prasain;Parimala Thulasiraman;Ruppa K. Thulasiraman
Affiliations:
University of Manitoba, Winnipeg, Manitoba;University of Manitoba, Winnipeg, Manitoba;University of Manitoba, Winnipeg, Manitoba;University of Manitoba, Winnipeg, Manitoba;University of Manitoba, Winnipeg, Manitoba
Venue:
C3S2E '09 Proceedings of the 2nd Canadian Conference on Computer Science and Software Engineering
Year:
2009

Citing 11
Cited 1

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Abstract

Option pricing is one of the challenging areas of computational finance. In this paper an attempt is made to apply Particle Swarm Optimization (PSO) for pricing options. PSO is one of the novel global search algorithm based on swarm intelligence. It is shown that PSO could be effectively used for single variate option pricing problem. The results are compared with standard classical Black-Scholes model for simple European options. With the current understanding from these initial experiments we suggest various avenues for further exploration.