Bitcoin

Read

<div class="cryptonews">
 <p class="is-style-lead">A new study proposes a novel method for pricing options on Bitcoin using neural networks.</p>
 <p class="is-style-default">The model incorporates Bitcoin (BTC) price dynamics and sentiment data to capture cryptocurrency markets’ frequent jumps and volatility clustering.</p>
 <p>Researchers developed a bivariate jump-diffusion <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a> based on past prices and Google Trends sentiment to describe Bitcoin price evolution. They derived an extended Black-Scholes equation for valuing Bitcoin options. The <a rel="noopener noreferrer nofollow" title="pricing" href="https://thebittimes.com/tag/pricing.html">pricing</a> partial differential equation was then solved numerically using neural networks.</p>
 <blockquote class="wp-block-quote">
  <p>“Neural networks provide a flexible parametric approach based on their universal approximation theoretical results.”</p> <cite>An extract from the study</cite>
 </blockquote>
 <p>The model was tested on highly volatile stocks like Tesla since active crypto options markets are still developing. Results showed average absolute pricing errors of around 3%, demonstrating viability.</p>
 <blockquote class="wp-block-quote">
  <p>This paper aims to provide the initial <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a>ling foundation, which can be improved incrementally as research progresses.</p> <cite>An extract from the study</cite>
 </blockquote>
 <div class="cn-block-related-link">
  <svg class="cn-block-related-link__icon icon" aria-hidden="true"><use xlink:href="#"></use>
  </svg> <span class="cn-block-related-link__prefix"> You might also like: </span> AI trading bots: how to build, test, and optimize
 </div>
 <p>The jump-diffusion <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a> enables financial applications like risk management, derivatives <a rel="noopener noreferrer nofollow" title="pricing" href="https://thebittimes.com/tag/pricing.html">pricing</a>, and portfolio optimization in the emerging cryptocurrency space. The researchers note arbitrage opportunities and market inefficiencies in crypto may require departing from traditional <a rel="noopener noreferrer nofollow" title="model" href="https://thebittimes.com/tag/model.html">model</a>s that assume efficiency and no arbitrage.</p>
 <p>As the crypto space evolves, enhanced models can capture microstructure details empirically. Nonetheless, this jump-diffusion methodology offers a starting point for financial engineering tailored to cryptocurrencies.</p>
 <blockquote class="wp-block-quote">
  <p>We welcome future research to build on these initial techniques for <a rel="noopener noreferrer nofollow" title="pricing" href="https://thebittimes.com/tag/pricing.html">pricing</a> and valuation of cryptocurrency-denominated assets.</p> <cite>An extract from the study</cite>
 </blockquote>
 <div class="cn-block-related-link">
  <svg class="cn-block-related-link__icon icon" aria-hidden="true"><use xlink:href="#"></use>
  </svg> <span class="cn-block-related-link__prefix"> Read more: </span> What are AI crypto coins?
 </div> <span class="google-news-banner__label">Follow Us on Google News</span>
</div>
<p>Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/ai-can-drive-new-bitcoin-pricing-model-study-finds-tbt67134.html">https://thebittimes.com/ai-can-drive-new-bitcoin-pricing-model-study-finds-tbt67134.html</a></p>

AI can drive new Bitcoin pricing model, study finds

TheBitTimes

Other articles published on Oct 20, 2023

Bitcoin SV price prediction as it climbs 71% in 24 hours

Recent Funding Rounds for Crypto Projects & Companies on October 19th💼🚀

Bitdeer to buy back shares worth up to $2m

[Now Live!] Finschia Governance Voting Reward Event

How Could Bitcoin Join the $120 Trillion Mutual Fund Industry?

Why Is RIF Coin Pumping? Analyst Shows Why the Price Could Surge Higher

Join our free newsletter for daily crypto updates!