AUTHOR=Pagnottoni Paolo TITLE=Neural Network Models for Bitcoin Option Pricing JOURNAL=Frontiers in Artificial Intelligence VOLUME=2 YEAR=2019 URL=https://www.frontiersin.org/journals/artificial-intelligence/articles/10.3389/frai.2019.00005 DOI=10.3389/frai.2019.00005 ISSN=2624-8212 ABSTRACT=

Despite the current growing interest in Bitcoins—and cryptocurrencies in general—financial instruments, as well as studies related to them, are quite underdeveloped. Therefore, this article aims to provide a suitable pricing model for options written on this peculiar underlying. This is done through an artificial neural network approach, where classical pricing models—namely the trinomial tree, Monte Carlo simulation, and explicit finite difference method—are used as input layers. Results show that options written on Bitcoin turn out to be systematically overpriced when considering classical methods, whereas a noticeable improvement in price predictions is achieved by means of the proposed neural network model.