Measure The Market Risk Of The Option With The Method Of Value At Risk

Option is newly developing derivative, it is mainly use in hedging of the underlying asset and avoiding the risk. At the same time, the option is always used to speculate because of it's characteristic of high financial lever, low bargaining cost, the convenience of complete a business transaction and high fluidity. The option plays a very important role in many financial market affair of huge loss result of the transaction failure of derivatives. Accordingly, it is an important financial problem that to accomplish real time tolerance and inspect of the option's market risk.The option is a kind of derivatives with the characteristic of unlinearity. Compare with other derivatives such as futures, it's market risk is harder to tolerance. Tradition method of risk tolerance believe that the yield distribution of option obey normal distribution the result always be asperity and the error is relatively great. In fact, the relation between price fluctuate of option and underlying asset present to be unlinearity, the result will be more decision if we take it for account.Correspondingly, in order to solve above-mentioned problem, how to tolerance the option's market risk were researched in this paper from B-S option pricing model and advanced market risk method-VaR (Value at Risk) model.After analyse every risk complication take affect in the course of option pricing, we make a parameter comfirm method about the linearity and unlinearity risk complication.Consult the tolerance method of fix income security's market risk, we consequence and conclude the S-y approximate method of tolerance option's market risk base on the key theory of VaR parameter model, and it offer a theoretical foundation of option's market risk real time tolerance. Through the analysis of the instance, we got a more accurate result as compare the S-y approximate method with tradion risk tolerance method.As to the application of this method in the course of our country develop the trade market of the derivative, we discussed it from the aspect of the department supervised and financial institution in this paper, and we analysed how to take a real time monitor and control of the market risk faced with both sides of marketing in the course of developing option trade.