An Applied Research And Its Analysis On The Control Variables In American Option Pricing

As to the investors, no matter what kind of financial objective they have, options are the most important trading tool and the accurate pricing for options is a pressing need. Up to now, the American option transactions are the most popular in the current financial market, thus, the research on American option pricing is particularly important. As For pricing options, the times of analog computing depend on the required accuracy. For example, Monte Carlo simulation, finite difference, and other binary tree and numerical methods usually requires an independent operator before reaching an reasonable accuracy of the estimated value of the derivative securities, which will cost a large amount of computing time. Therefore, it is necessary to study the efficient pricing.Based on the Black-Schools model and the organic combination of the control variables and the classical method of CRR, this dissertation proposes a pricing method, namely CV-CRR on the pricing of American put options. Through empirical analysis, compared with CRR method, it is an accurate and effective pricing method on the efficiency and computation precision. On the basis of this, the paper proposed Monte-Carlo simulation to replace Black-Scholes model to price American put option, which is integrated with the classical methods of CRR in the same way the Black-Scholes model does. The same conclusion has been proven by empirical analysis. Moreover, it putted forward to induct tree analysis technique and variance to reduce technical thinking into Monte-Carlo simulation broke traditional conception that Monte-Carlo simulation could not be applied into the pricing of American put options.In addition, this dissertation has introduced the classical model of binary tree correction parameter model, namely, the EQP-binary tree model and a new type of random error correction binary tree parameter model, and analyzed the efficient of pricing and precision of computation, respectively based on the Black-Scholes model and Monte-Carlo simulation of the CV-CRR method under the empirical analysis of the correction in the model parameters. Positive results showed that, the CV-CRR method under the EQP-binary tree model and new binary tree parameters is a convergence, high-efficiency, high-precision numerical pricing method.