Pricing Derivatives with Smarter Labels

Predicted option prices, determined through standard, pathwise differential, and LRM differential training-each assessed with a dataset of 512 labels-demonstrate the efficacy of these training methods in approximating target prices.

A novel machine learning approach leveraging likelihood ratios significantly improves the accuracy of financial derivative pricing, particularly for complex contracts.

Can AI Beat the Market?

Large language models-specifically Zypher-7B and Mistral-7B-demonstrated the capacity to optimize mutual fund portfolios, yielding improved returns and risk-adjusted returns-particularly in Funds A and C-while Microsoft Phi-2 consistently underperformed across all tested allocations.

New research shows that artificial intelligence can intelligently allocate funds within mutual fund portfolios to maximize returns while minimizing risk.