Paper
Option Model Calibration Using a Bacterial Foraging Optimization Algorithm
Jing Dang, Anthony Brabazon, Michael O’Neill, and David Edelman
The Bacterial Foraging Optimization (BFO) algorithm is a biologically inspired computation technique which is based on mimicking the foraging behavior of E.coli bacteria. This paper illustrates how a BFO algorithm can be constructed and applied to solve parameter estimation of a EGARCH-M model which is then used for calibration of a volatility option pricing model. The results from the algorithm are shown to be robust and extendable, suggesting the potential of applying the BFO for financial modeling.
May 1st, 2008 at 7:15 am
[...] tip: Alea) [...]