Research On Option Exotic Pricing And Application

In 1973, Black-Scholes written the initiate paper "The pricing of option and corporate liabilities" ,which indicates the naissance of option pricing theory. In the following more twenty years, researches on option pricing and its application are vigorously developed, and plentiful and substantial harvest is acquired. Study on this theory is on the premise of western mature option market. In China, researches on option pricing and its application are further behind developed western country. With our reforming and opening, perfecting socialism market economy and entering into WTO, it is important and significant to strengthen our researches on option pricing and its application by using western option pricing for reference.This dissertation focuses on studying option exotic pricing and many application problems. The main works are as follows:1 .Illustrate the reflection principle for a random walk with one absorbing barrier and show the Boyle-Lau algorithm for pricing single barrier options. On the basis of them, we consider the reflection principle for random walks with two absorbing barriers, and extend the Boyle-Lau algorithm to double knockout options exotic pricing.2. With the hypotheses of the Black-Scholes option-pricing model, this thesis constructs a kind of option: two-asset Asian Rainbow option exotic pricing model using the riskless hedging argument and Ito's Lemma. With the boundary conditions, we derive the analytic pricing formula of the two-asset geometric Asian Rainbow option. With the help of it, we use the variace reduction technique in the Monte Carlo simulation to price the arithmetic Asian Rainbow option with two-asset and obtain accurately simulated option exotic price.3. The exotic pricing of arithmetic Asian options for underlying asset following the constant elasticity of variance (CEV) process is investigated. The thesis proposes a trinomial tree method to approximate the CEV process and use it to evaluate different types of Asian options: average price option and average strike price.4. Under the risk neutral pricing principle, this paper derives the analytical exotic valuation formulas for compound options when the underlying asset follows a jump-diffusion process. We then apply these results to pricing American call options on stocks that pay discrete dividends and American options on assets that pay continuous...