This work focuses on the dynamic hedging of financial derivatives, where a reinforcement learning algorithm is designed to minimize the variance of the delta hedging process. In contrast to previous research in this area, we apply uncertainty estimation technology to measure the uncertainty of the agent's decision, which can further reduce unnecessary wear and tear in the hedging process and control model overconfidence that may lead to significant losses. Numerical experiments show the superiority of our strategy in Monte Carlo simulations and SP 500 option data.
@article{arxiv.2306.10743,
title = {Option Dynamic Hedging Using Reinforcement Learning},
author = {Cong Zheng and Jiafa He and Can Yang},
journal= {arXiv preprint arXiv:2306.10743},
year = {2023}
}