Derivatives Pricing In China Market

In this paper, we discuss three popular derivatives in China market, including equity derivatives, foreign exchange derivatives and interest rate derivatives. It can help the investors and regulators to understand these products, and it will be helpful for risk management and hedging. The thesis is organized as follows:(1) In China warrant market, the strike price will be adjusted with the payment of dividend. This adjustment is different with other dividend adjustment. We conduct research on warrant pricing under determined dividend model and stochastic dividend yield model.(2) The phenomenon of return kurtosis and volatility smile is contradict with the Black-Scholes model. We introduce the hyperbolic volatility model to overcome the drawbacks, and we conduct research on barrier option pricing with this model. Through reduction method, we convert the original pricing problem to a new barrier option pricing problem, where the underlying asset follows Arithmetic Brownian motion. With the knowledge of Brownian bridge, we give an improved Monte Carlo simulation method. This algorithm is proved to be efficient compared with the traditional Monte Carlo method.(3) We conduct research on callable range accrual pricing with Libor market model. With the occupation time distribution of Brownian bridge, we give a fast algorithm to compute the days which the Libor rates are in the specified range. This pricing results are consistent with the market quotes.