Generalized ant programming in option pricing: determining implied volatilities based on American put options

Generalized ant programming is a new method inspired by the genetic programming approach as well as by ant systems. It is applicable to all problems in which the search space of feasible solutions consists of computer programs. We use generalized ant programming to derive analytical approximations for determining the implied volatility based on American put options. Using experimental data as well as huge validation data sets we can show that the generalized ant programming based formulas for calculating implied volatilities deliver accurate approximation results and outperform other approximations presented in the literature.

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