Looking Back On The Option Pricing Model

The option is a certain right that the holder can buy or sell quantity and quality of underlying assets at fixed time in the future after paying the cost of options. in recent years, options, as an effective method to aviod risk or speculation have rapid development. In the option contract, option price is a unique variable which changes with the supply and demand in the market, the option pricing is the core issue in the trade of option. In 1973 F.Black and M.Scholes ,the scholars in Chicago University raised Black-Scholes Option Pricing Model, Black-Scholes Model makes great progress of the research on option pricing. In recent years,on the basis of the standard options, using option theory and analysis methods ,people design the variability of options with different characteristics. Look back opotion is one of the options, it is a path-dependent options, options' yield-to-maturity depends the underlying assets experienced the maximum or minimum prices in the validity time. Because of the property of path-dependent, there exists distinguishes difference between look back options pricing model and standard options.In this paper we predecessors on the basis of conditions to further broaden. In Chapter III, section I, we change two assumptions of Black-Scholes model assumptions: the first, the stock price fluctuations follows CEV process; the second, building a transaction costs, and transaction costs associated with stock's fluctuations .On this basis, we launched Pricing of look back Options with transaction costs under CEV process and used a binary tree method to obtain the numerical solution. In Chapter 3, Section 2, we provides pricing model and pricing formulas for look back options with Transaction costs when the price of underlying asset follows the model with time-dependent parameters and we used martingale method to get pricing formula, Chapter III of the third quarter, we build up the pricing model With Transaction Costs Under Time-Dependent Parameters and stock's fluctuations follows CEV. The main consequence is as follows:1. Pricing of Look Back Options With Transaction Costs Under CEV and used a binary tree method to obtain the numerical solution.2. Pricing of Look Back Options With Transaction Costs Under Time-Dependent Parameters used martingale method to get pricing formula,3. the pricing model With Transaction Costs Under Time-Dependent Parameters and stock's fluctuations follows CEV.