Option Pricing with Genetic Programming

Abstract

In the last decades, an increasing attention has been directed to the application of Genetic Programming. This approach has been adopted to a wide number of fields, reporting successful results also in finance domain as automated computational programming tool. Starting from the theoretical research in Genetic Programming, the aim of this work is to focus on the actual implementation of this methodology to the financial field, especially on the prediction of derivative securities behavior. The attention will be centered on the option pricing and empirical tests will be carried out on market data. Proceeding from the analysis of already developed and qualified studies in the existing literature, this work examines developed models and the reached conclusions. Further, the research will be amplified including the examination of the effect of different variables on the option price behavior, particularly after the variation of different parameters.