JOURNAL OF SHANDONG UNIVERSITY(NATURAL SCIENCE) ›› 2018, Vol. 53 ›› Issue (12): 80-89.doi: 10.6040/j.issn.1671-9352.0.2018.057

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Calibrating option pricing models with cross entropy bat algorithm

LI Guo-cheng1, WANG Ji-xia2*   

  1. 1. School of Finance &
    Mathematics, West Anhui University, Luan 237012, Anhui, China;
    2. School of Mathematics and Information Sciences, Henan Normal University, Xinxiang 453007, Henan, China
  • Online:2018-12-20 Published:2018-12-18

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Abstract: Parameter estimation of option pricing model is usually a nonlinear optimization problem with no convex, which leads to the classical optimization method cannot be applied. Based on cross entropy bat algorithm, we studied how to solve parameter estimation problems of option pricing models such as Mertons jump-diffusion model, Hestons stochastic volatility model and Batess stochastic volatility with jump model. The empirical results show that the cross entropy bat algorithm is feasible and effective for solving the parameter estimation problems of option pricing model.

Key words: cross entropy bat algorithm, option pricing model, parameter estimation, jump-diffusion model, stochastic volatility model

CLC Number: 

  • O233
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