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Joined: April 30th, 2020, 12:32 am

Latest development in Financial Engineering

April 30th, 2020, 12:43 am

My discussion class (grade counted) in Financial Engineering (exotic options and structured products) is asking us to describe a recent development in financial engineering that is interesting and that is likely to generate a long-term impact on the industry.
Very much appreciated if anyone could share some insights or shares some papers/articles.

Many thanks,
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Posts: 6523
Joined: February 3rd, 2011, 2:19 pm

Re: Latest development in Financial Engineering

May 1st, 2020, 3:54 pm

This is probably on the edge of your definition of “financial engineering”, but how to design and execute actively managed ETFs is a current hot topic in the asset management community.
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Joined: June 2nd, 2020, 11:09 am

Re: Latest development in Financial Engineering

June 2nd, 2020, 1:42 pm

I don't know if this is what you'd call Hot, but I've been hearing talk about using Neural Networks for  Bermudan and American options pricing in high dimension.
a few papers : 
Kohler, M. , Krzyzak, A. and Todorovic, N. (2010), Pricing Of High-Dimensional American Options By Neural Networks. Mathematical Finance, Vol. 20. MC approach with NN to estimate the continuation values; Consider at most 5-d basket. 
Ludkovski M., (2018). Kriging Metamodels and Experimental Design for Bermudan Option Pricing. Journal of Computational Finance, Vol. 22. Use of GPR and MC approach; Consider at most 5-d basket. 
Becker S., Cheridito P., and Jentzen A., (2019) Deep Optimal Stopping. Journal of Machine Learning Research, Vol. 20. Deep learning method for optimal stopping problems; Consider at most 500-d basket.
 Lapeyre, B., Lelong, J. (2019). Neural Network Regression for Bermudan Option Pricing. arXiv preprint arXiv:1907.06474. Prove the convergence of the Longstaff-Schwartz algorithm when the LS regression is replaced by NN.