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frolloos


Total Posts: 126
Joined: Dec 2007
 
Posted: 2020-11-15 08:35
I have not found a cure yet for my volatility derivs OCD, so here is a paper on volswaps in normal stoch vol models

Comments welcome, and I promise I'll stop my vol OCD once I find an expression for vol options fit for children (with that I mean a simple expression).

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3726557

No vanna, no cry

nikol


Total Posts: 1235
Joined: Jun 2005
 
Posted: 2020-11-15 13:02
Please, look this.

"We introduce novel algorithms for training fast, accurate pricing and risk approximations, online, in real-time, with convergence guarantees. Our machinery is applicable to arbitrary Derivatives instruments or trading books, under arbitrary stochastic models of the underlying market variables. It effectively resolves computational bottlenecks of Derivatives risk reports and capital calculations."

https://arxiv.org/abs/2005.02347

Of course, in order to apply ML/ANN(AI) one must understand mechanics of derivatives. But I am afraid that all current efforts are put into the reduction of time-to-delivery from idea to product inside Front Office pricing machine. That idea of operational efficiency, if I am not mistaken, was picked up by SciComp (Curt Randal), who developed meta-language for contract and process descriptions with automatic C++ code generator. Now they use ANNs and ML libraries, so they follow general trend. Today ANNs are used even to deliver close-form solutions.

https://www.scicomp.com/ready-to-use-derivatives-pricing/multi-asset-equity-variance-linked-notes/

That's not to discourage/diminish your work (my apology if it looks like) but to set on the more realistic path.

frolloos


Total Posts: 126
Joined: Dec 2007
 
Posted: 2020-11-15 13:34
Thanks nikol - absolutely no need to apologize of course. And you're absolutely right that I am not on a relevant or realistic path.
I just do this for fun, am stubbornly old fashioned, prefer pen and paper, and tend to shy away from anything that contains the words "machine" and "intelligence" in one sentence :)

No vanna, no cry

nikol


Total Posts: 1235
Joined: Jun 2005
 
Posted: 2020-11-15 14:12
Well, those ML/AI just other tools one can use if to stay on curiousity path.
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