A genetic algorithm for option pricing: The American put option

The search for a better option pricing model continues to find the one that outperforms the existing ones in the financial market. In this paper, we present a Genetic Algorithm (GA) to price a fixed term American put option when the underlying asset price is Geometric Brownian Motion. The Genetic Algorithm has a better approximation of the relationship between the option price and its contract terms. Our method produces a perfect and a minimum option price that outperforms other models like the Black-Scholes under the same conditions. The method requires minimum assumptions and can easily adapt to changes and uncertainties in the financial environments.