Bridging Structured Knowledge and Data: A Unified Framework with Finance Applications

arXiv stat.ML / 4/2/2026

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Key Points

  • The paper introduces Structured-Knowledge-Informed Neural Networks (SKINNs), which incorporate theoretical, simulated, previously learned, or cross-domain knowledge as differentiable constraints inside a neural estimation framework.
  • SKINNs estimate neural network weights and economically meaningful structural parameters jointly in a single optimization, using collocation points to enforce consistency beyond just the observed data.
  • The framework is formulated as an M-estimator with strong statistical properties, including consistency, asymptotic normality, root-N convergence, sandwich covariance, and recovery of pseudo-true parameters under misspecification.
  • The authors prove identification conditions for structural parameters under joint model flexibility and derive generalization/target-risk bounds under distribution shifts, along with a characterization of the weighting parameter that controls bias–variance tradeoffs.
  • In a finance-focused option pricing case study, SKINNs improve out-of-sample valuation and hedging (notably at longer horizons and in high-volatility regimes) while yielding more stable, interpretable structural parameters than conventional calibration.

Abstract

We develop Structured-Knowledge-Informed Neural Networks (SKINNs), a unified estimation framework that embeds theoretical, simulated, previously learned, or cross-domain insights as differentiable constraints within flexible neural function approximation. SKINNs jointly estimate neural network parameters and economically meaningful structural parameters in a single optimization problem, enforcing theoretical consistency not only on observed data but over a broader input domain through collocation, and therefore nesting approaches such as functional GMM, Bayesian updating, transfer learning, PINNs, and surrogate modeling. SKINNs define a class of M-estimators that are consistent and asymptotically normal with root-N convergence, sandwich covariance, and recovery of pseudo-true parameters under misspecification. We establish identification of structural parameters under joint flexibility, derive generalization and target-risk bounds under distributional shift in a convex proxy, and provide a restricted-optimal characterization of the weighting parameter that governs the bias-variance tradeoff. In an illustrative financial application to option pricing, SKINNs improve out-of-sample valuation and hedging performance, particularly at longer horizons and during high-volatility regimes, while recovering economically interpretable structural parameters with improved stability relative to conventional calibration. More broadly, SKINNs provide a general econometric framework for combining model-based reasoning with high-dimensional, data-driven estimation.

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