Hedging down-and-out puts (and up-and-out calls), where the maximum payoff is reached just before a barrier is hit that … would render the claim worthless afterwards, is challenging. All hedging methods potentially lead to large errors when the …, we analyze this hedging situation, especially the case of overnight trading gaps. We show how a position in a short …

In this paper we introduce a deep learning method for pricing and hedging American-style options. It first computes a … estimate and confidence intervals. Finally, it constructs an approximate dynamic hedging strategy. We test the approach on … different specifications of a Bermudan max-call option. In all cases it produces highly accurate prices and dynamic hedging …