The Option Pricing Theory And Its Application In Our Country

The article is composed of two parts: one is the option pricing theory; the other is the application of the theory. The content of the first part is the systematic introduction of the generation, deduction and development of the option pricing theory.Emphasis is laid on the Black-Scholes option pricing model and its analytic solution with the restriction of the boundary condition. By adjusting the basic hypothesis of the model, the model is broadened to the multi-factor option pricing model. There is also a brief introduction of another commonly used pricing model, the binominal option pricing model, including its relations to the Black-Scholes option pricing model. Other numerical algorithms are also introduced, such as the Monte Carlo simulation, finite difference method, etc.In the second part, i.e. the last four chapters of the article, we introduce the application of the theories mentioned in the first part. Although there is no real option pricing trading market all across the nation, the application of the theories will enjoy the bright future because many financial tools and businesses embody the idea of the option.The main applications include: the pricing of the company's financing tools, including stock, bond, convertible bond and so on; the calculation of the proportion of liability to stock in case of changing the liability a company owes to a creditor into the stock share; the evaluation of the value of a loan and analysis of the credit risk of loans in our country from the point of option; and the evaluation of the effectiveness of executive stock.option and the improvement of the executive stock option.The article consists of both qualitative and quantitative analysis, in combination with mathematics formula and charts as an aid to explain the problems. In order to ensure accuracy of the results, the article provides the logical procedures and C language program source code designed by the author to calculate the price of financial assets examples accurately. The results reflect the practicality very well and show the correctness and the effectiveness of the theory.