Option Pricing Using Ensemble Learning
By: Zeyuan Li, Qingdao Huang
Potential Business Impact:
Makes computer stock predictions more accurate.
Ensemble learning is characterized by flexibility, high precision, and refined structure. As a critical component within computational finance, option pricing with machine learning requires both high predictive accuracy and reduced structural complexity-features that align well with the inherent advantages of ensemble learning. This paper investigates the application of ensemble learning to option pricing, and conducts a comparative analysis with classical machine learning models to assess their performance in terms of accuracy, local feature extraction, and robustness to noise. A novel experimental strategy is introduced, leveraging parameter transfer across experiments to improve robustness and realism in financial simulations.Building upon this strategy, an evaluation mechanism is developed that incorporates a scoring strategy and a weighted evaluation strategy explicitly emphasizing the foundational role of financial theory. This mechanism embodies an orderly integration of theoretical finance and computational methods. In addition, the study examines the interaction between sliding window technique and noise, revealing nuanced patterns that suggest a potential connection relevant to ongoing research in machine learning and data science.
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