Stock Option & Applying Of B-S Option Pricing Model

Entering WTO,our economy will merge with the world more deeply and widely,the market of financial becomes international and marketed than before,developing financial derivatives is one of the important topics.we first talked about the purpose and meaning of option study ,then discussed the importance and feasibility of introducing option to china。. In recent years ,our security market grows rapidly which has became larger than before and play more important role in domestic economy, but the market system is unperfected which increased systematic risk,Now it demands risk-avoiding instruments imperatively。appealing of developing stock derivatives more strongly day after day 。stock option is a important system which can guarantee the capital safely,fluidly and gainly.which has the function of risk-avoiding ,pricing –finding,speculation and arbitrage。Option can be buy at low price and be the security for dealer's underlying assets which play a stabilized role to the economy。Introducing option and option tactics is passable at present 。Then we talked abut option,option contract,dealing tactics,option hedging and gains。Option is a kind of special financial contracts which gives holder rights of doing something ,but the holder have no obligation 。that is to say the rights and obligation of two party are not equality,the inequality will balanced by premium fees。The option can be divided into calls and puts according the rights of the buyers；we can divide it into American option and European option due to the difference of execute days,the dealing ways of the option is:offsetting order ,execute contract ,abandon。Option dealing can form varieties combination through different contract which including one option mixed with stock ,spreads,straddle and other complicated ones,the investors select the tactics due to the expects of the underlings and accepted risk and gains。 Black-Scholes pricing model has been designed in the essay。Formula of no-dividends European call: B-S pricing model calculation Inputs:Present price S Striking price X Time limit T-t Interest r Vitality σ Out put: European call European putEuropean call Delta European put Delta European call Theta European put Theta European call Gamma European put Gamma European call Vega European put Vega European call Rho European put Rho On the basis of the formula,we selected 3 company (Ge,Ericy,Xom) as objective to analysis on it。according to the contract we qualification some elements ,then analysis the difference between the throyitical value and practical ones .At last, we get the following conclusion:1.Introducing stock option is significant and passable in china from the aspect of deepening capital market and getting exotic option dealing and tactics experience 。It is feasible to get option,option tactics to china and necessary to discuss option pricing model。2.Option dealing can form varieties combination through different contract including one option mixed with stock ,spreads,straddle and other complicated ones, the investors select the tactics according the expects of the underlings and accepted risk-gains。 3.Anylysise detail on the B-S inflected elements,designe B-S computer program and discuss of using option offset risk 。point that the real meaning of option pricing model is that which provide present market a "points" ,the investor can forecast complicated option price through forecast each elements。 4.The theoretical option price has been done through three companies, then discuss the difference between the theory price and the practical ones, it has been proved that the option-pricing model is meaningful.