Reinforcement Learning for Credit Index Option Hedging
Reinforcement Learning for Credit Index Option Hedging ArXiv ID: 2307.09844 “View on arXiv” Authors: Unknown Abstract In this paper, we focus on finding the optimal hedging strategy of a credit index option using reinforcement learning. We take a practical approach, where the focus is on realism i.e. discrete time, transaction costs; even testing our policy on real market data. We apply a state of the art algorithm, the Trust Region Volatility Optimization (TRVO) algorithm and show that the derived hedging strategy outperforms the practitioner’s Black & Scholes delta hedge. ...