mlsanityData to 7 Oct 2026

Reinforcement Learning for Option Hedging: Static Implied-Volatility Fit versus Shortfall-Aware Performance

arXiv 2601.01709 ↗First posted 5 Jan 2026q-fin.PR cs.LGcited by 2

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Abstract (arXiv)

We extend the Q-learner in Black-Scholes (QLBS) framework by incorporating risk aversion and trading costs, and propose a novel Replication Learning of Option Pricing (RLOP) approach. Both methods are fully compatible with standard reinforcement learning algorithms and operate under market frictions. Using SPY and XOP option data, we evaluate performance along static and dynamic dimensions. Adaptive-QLBS achieves higher static pricing accuracy in implied volatility space, while RLOP delivers superior dynamic hedging performance by reducing shortfall probability. These results highlight the importance of evaluating option pricing models beyond static fit, emphasizing realized hedging outcomes.

Key facts. Cited by 2 papers in the map (data through 7 Oct 2026). Builds on 4 of its 21 references that are in the map. First posted on arXiv 5 Jan 2026.

Builds on

4 of 21 references.

References · 4

  1. 2015Deep Residual Learning for Image Recognitioncited by 51,809
  2. 2018Deep Hedgingcited by 106
  3. 2017QLBS: Q-Learner in the Black-Scholes(-Merton) Worldscited by 23
  4. 2018The QLBS Q-Learner Goes NuQLear: Fitted Q Iteration, Inverse RL, and Option Portfolioscited by 8

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Cited by year (2026 to 7 Oct)

Citing papers per year: 2026: 2.

2 papers.