Non-parametric methods of option pricing

Non-parametric and computational methods of option pricing have recently attracted attention of researchers. These typically include highly data intensive, model-free approaches that complement traditional parametric methods. Non-parametric and computational methods of option pricing typically include highly data intensive, model-free approaches that complement traditional parametric methods. One characteristic of such methods is their independence of the assumptions of continuous-time finance theory. It is their great strength and a weakness. Strength since it presumes no complex models from which prices are deduced, rather it induces the structure of the problem from data. Weakness as there is no guarantee that the prices obtained from these models will conform to rational pricing. The presentation reviews the current state of non-parametric option pricing, covering; parametric and non-parametric adjustments to Black-Sholes model and purely non-parametric methods.