Machine Learning Reshapes Derivative Trading: The 2026 Institutional Playbook
Neural networks now price exotic options in microseconds, rendering Monte Carlo simulations obsolete. Hedge funds deploy differential ML to capture Greeks with unprecedented precision, while transformer models detect volatility regimes that GARCH frameworks miss.
Reinforcement learning agents execute complex trades autonomously, optimizing for liquidity fragmentation and slippage reduction. The frontier extends to Chebyshev tensors for high-dimensional pricing—tools once confined to academic papers now drive alpha generation.