A New Method Of Option Pricing Based On Black-Scholes Model

The classical B-S Formula of option pricing has been got by calculating E[mux(X,O)].That is putting the minimum point of H(α)=E[(X-α)²]as option price,which can be intepreted as usingαto predict X in the sense of mean square error.Actual financial markets are incompleted and distributions of yield rates are fat-tailed,so in this paper we will generalize the upper formula and take the minimum point of H_k(α)=E[(X-α)^2k]as option price,according to the convexity of the yield curve.Then we compare the effects of the two pricing formulas with the GARCH model of DJSH rate and by use of the method of stochastic simulation.