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Persistent URL http://purl.org/net/epubs/work/34409
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Record Id 34409
Title Confidence limits for data mining models of options prices
Abstract Non-parametric methods such as artificial neural nets can successfully model prices of financial options, out-performing the Black?Scholes analytic model (Eur. Phys. J. B 27 (2002), 219). However, the accuracy of such approaches is usually expressed only by a global fitting error measure. This paper describes a robust method for determining prediction intervals for models derived by non-linear regression. We have demonstrated it by application to a standard synthetic example (29th Annual Conference of the IEEE Industrial Electronics Society, Special Session on Intelligent Systems, pp. 1926?1931). The method is used here to obtain prediction intervals for option prices using market data for LIFFE ??ESX?? FTSE 100 index options(http://www.liffe.com/liffedata/contracts/month_onmonth.xls). We avoid special neural net architectures and use standard regression procedures to determine local error bars. The method is appropriate for target data with non constant variance (or volatility).
Organisation CCLRC , BITD
Keywords Engineering , Data mining , Neural nets , Option pricing
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Language English (EN)
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Journal Article Physica A 344 (2004): 162-167. doi:10.1016/j.physa.2004.06.112 PhysicaA344p162-167.pdf 2004