Preliminary Study On Index Futures And Options Markets In China And Option Pricing

As one of the financial derivatives that have developed fastest, the number of the index options traded has exceeded that of the securities. While in our country, there is no financial derivatives .Now some stocks prices and the stock index decrease acutely, which leads to enormous loss. As one of the basic hedging tools, index future or option can prevent the value of portfolio from decreasing efficiently.Under this situation, this paper contains two parts. On the one hand, after testing the market efficiency according to random walk, this paper will present an appropriate index option agreement by analyzing the domestic market quantitatively. Especially, when we consider conditional heteroscedasticity during the hedging simulation, we use the method of EWMA which represent the volatility smile and is often used in calculating the VAR. And we will get an excellent simulation result. On the other hand, taking advantage of the method of transition density, we generate the B-S pricing formula. And this paper suggests a valid method to price the index option with raising limit or falling limit.