A New European-style Option Pricing Model

As the global financial and trading activities have become increasingly international,and liberalization.investment banking industry.The international capital markets of investment banking industry are growing closer and becoming more complex and unpredictable situation.A number of well-known investment banks such as Barings Bank, Yamaichi Securities companies have closed down especially in Southeast Asia and South America countries, financial crises are all related to financial risks. In 2008 the sub-prime mortgage crisis in United State is causing a global financial turmoil,rational asset pricing and risk management and control has become the financial and securities institutions, investors and regulators are facing the problems to be solved.In traditional Black-Scholes pricing formula, the securities price model is based on the linear movement in real terms in the random drift, but in the real world financial markets and there is a big difference of this ideal situation.Due to market uncertainty and the economic environment changes, such as:interest rates, inflation rate, investors expect and so on, making great potential stock price fluctuations possible.Therefore,this article reconsideration of the Black-Scholes option pricing formula.Firstly, this article in order to smooth fluctuations in prices of the securities in the market uncertainty this article set up securities based on the average prices of the securities price model, and on this basis to calculate a European call option price formula. Finally to the risk of its binding to become certain risks expected to meet European option pricing model.Contrast to the traditional Black-Scholes pricing formula, the new model can better adapt to market fluctuations, the expansion of the option pricing method has an important role.