Pricing R$/USD exchange rate options: a comparison between the Black model and the artificial neural networks model

Authors

  • Leandro dos Santos Maciel Universidade Estadual de Campinas; Faculdade de Engenharia Elétrica e Computação; Departamento de Controle e Automação
  • Rosangela Ballini Universidade Estadual de Campinas; Instituto de Economia
  • Rodrigo Lanna Franco da Silveira Universidade Estadual de Campinas; Instituto de Economia

DOI:

https://doi.org/10.5700/rausp1028

Keywords:

artificial neural networks, options pricing, Black model

Abstract

In this study, a multilayer neural network model was applied to the pricing of R$/USD exchange rate call options traded on the São Paulo Securities, Commodities and Futures Exchange (BM&FBovespa) from January 2004 to December 2007. Based on the actual market prices, the performances of a neural network model and the Black model were compared, using the usual error metrics and statistical tests. Overall, the results showed that the artificial intelligence model outperformed the Black model for the different degrees of moneyness.

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Published

2012-03-01

Issue

Vol. 47 No. 1 (2012)

Section

Finance & Accounting

How to Cite

Pricing R$/USD exchange rate options: a comparison between the Black model and the artificial neural networks model. (2012). Revista De Administração, 47(1), 96-111. https://doi.org/10.5700/rausp1028