Neural networks for option pricing and hedging: a literature review

This work provides a review of this literature. The motivation for this summary arose from our companion paper Ruf and W ang [2019]. There we continue th e discussions of this note; in particular, of potentially problematic data leakage when training ANNs to historic financial data. This paper is organised in the following way. Section 2 featu res Table 1, a summary of the literature that concerns the use of ANNs for nonparametric pricing (and hedging) of options. Section 3 provides a list of recommended papers from Table 1. Section 4 provides a n overview of related work where ANNs are applied in the context of option pricing and hedging, but not necessarily as nonparametric estimation tools. Section 5 briefly discusses various regularisation techniq ues used in the reviewed literature.