A NOVEL METHOD FOR ESTIMATING THE INVERSE FUNCTION OF BLACK-SCHOLES OPTION PRICING MODEL USING ARTIFICIAL NEURAL NETWORKS

Abstract

Black-Scholes (BS) model is a well-known model for pricing options. Option is a derivative financial instrument which gives its owner the right of buying the underlying asset at a pre specified date for a pre specified price. BS model calculates the option price using 5 input variables and parameters including current underlying price, strike price, time to maturity, interest rate and the volatility of the underlying asset price.