EUROPEAN AND AMERICAN OPTION PRICING USING MULTIOBJECTIVE BAT ALGORITHM (MOBA)

• Main Author: Ramdhani, Sina
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76483
• Institution: Institut Teknologi Bandung

Financial markets are places where the sale and purchase of financial securities such as stocks, bonds, options and so on take place. One of the problems in financial markets is finding the value of an option contract. The most popular and widely traded options are European options and American options. There are various ways to determine the value of options ranging from the Black-Scholes-Merton model, Binomial method, and other methods. One of the new approaches to determine option value is multiobjective optimization. The trick is to change the option problem into a multiobjective optimization problem in the form of two objective functions, namely payoff and probability. In this research, Multiobjective Bat Algorithm (MOBA) is used to determine the value of European options and American options. The data used is option value data in the financial market. The way the MOBA algorithm determines the value of options is by combining the payoff and probability functions into a single objective with the weighted sum method. If the pareto front formed still has empty segments, it is continued with the adaptive weighted sum method (AWSM). The result obtained is that the MOBA algorithm is able to determine the option value with a relatively small error. From these results it can be concluded that the MOBA algorithm can be used as a way other than Black-Scholes, Binomial, etc. in determining the value of options.