Journal article

Estimating risks of European option books using neural-SDE market models

Abstract:: In this paper we examine the capacity of arbitrage-free neural stochastic differential equation market models to produce realistic scenarios for the joint dynamics of multiple European options on a single underlying. We subsequently demonstrate their use as a risk simulation engine for option portfolios. Through backtesting analysis we show that our models are more computationally efficient and accurate for evaluating the value-at-risk of option portfolios than standard filtered historical simulation approaches, with better coverage and less procyclicality.

Publication status:: Published

Peer review status:: Peer reviewed

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APA Style

Cohen, S. N., Reisinger, C., & Wang, S. (2023). Estimating risks of European option books using neural-SDE market models. Journal of Computational Finance, 26(3), 33–72.

MLA Style

Cohen, S. N., et al. “Estimating Risks of European Option Books Using Neural-SDE Market Models.” Journal of Computational Finance, vol. 26, no. 3, Infopro Digital Services, 2023, pp. 33–72.

Chicago Style

Cohen, SN, C Reisinger, and S Wang. 2023. “Estimating Risks of European Option Books Using Neural-SDE Market Models.” Journal of Computational Finance 26 (3): 33–72.
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Files:: Cohen_et_al_2023_Estimatinng_risks_of.pdf

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Cohen_et_al_2023_Appendix.pdf

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Publisher copy:: 10.21314/JCF.2022.028

Authors

+ Cohen, SN More by this author

Institution:: University of Oxford
Division:: MPLS
Department:: Mathematical Institute
Role:: Author

+ Reisinger, C More by this author

Institution:: University of Oxford
Division:: MPLS
Department:: Mathematical Institute
Oxford college:: St Catherine's College
Role:: Author
ORCID:: 0000-0003-4027-5298

+ Wang, S More by this author

Institution:: University of Oxford
Division:: MPLS
Department:: Mathematical Institute
Role:: Author

Publisher:: Infopro Digital Services
Journal:: Journal of Computational Finance More from this journal
Volume:: 26
Issue:: 3
Pages:: 33-72
Publication date:: 2023-03-07
Acceptance date:: 2022-12-22
DOI:: 10.21314/JCF.2022.028
EISSN:: 1755-2850
ISSN:: 1460-1559

Language:: English
Keywords:: no-arbitrage

European options

neural SDE

risk measures

market models

market simulators
Pubs id:: 1316994
Local pid:: pubs:1316994
Deposit date:: 2022-12-23

Terms of use

Copyright holder:: Infopro Digital Risk (IP) Limited
Copyright date:: 2023
Rights statement:: © 2023 Infopro Digital Risk (IP) Limited.

Licence:: Terms and Conditions of Use for Oxford University Research Archive

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