A Comparative Study On The Pricing Methods Of China 's Grading Funds

Structured mutual fund is a kind of structured securities investment funds which developed rapidly in recent years. Structured mutual fund can divided into two parts of different risk and return characteristics. Since the history of Structured mutual fund is short in China, theoretical research is less mature and has not yet formed an effective pricing system in the field of classification fund pricing. Based on reading previous paper, found the Black-Scholes option pricing model and Monte Carlo simulation is non effective in pricing Part A fund. The research of structured mutual fund is mainly focus on Part B fund, but the study of Part A is not taken seriously. Until now, there have not classified Part A fund according to the different terms of the design, and haven’t identified applicable pricing methods for each category of Part A fund to constitute pricing system.This paper briefly introduces the basic situation of the development of structured mutual fund and its terms and rules. Secondly, Through literature research, found that the Black-Scholes option pricing model and Monte Carlo simulation have poor effective in pricing the Part A fund,and have less quantitative analysis to measure the effect of the priority share pricing, preferred share pricing method is not carried out systematic. Considering the importance of the priority share in the structured mutual fund pricing system, this paper will divide Part A fund into two different categories by the differences in design terms. Then introduces the classic DCF model to the theoretical system of classification of funds in order to improve pricing efficiency, and use empirical quantitative comparison of each category preferred share pricing methods, to explore the scope for each preferred share class applicable pricing methods.By comparing the results of empirical research of the pricing model, the following conclusions:(1)For the options type Part A fund, Black-Scholes option pricing model is an efficient pricing model, and the pricing efficiency generally higher than in previous papers pricing effect. I believe that this event mainly due to the gradual improvement of market liquidity and market investors gradually recognized the investment value of the preferred share in recent years, so that the deviation of market price and the theoretical price gradually narrowed. (2) For the sustainable debt type Part A fund, when the Part A fund far from the threshold point of point conversion (more than 25%), the improved DCF model has an efficiency pricing; when the Part A fund close to the threshold point of point conversion (less than 25%), the Monte Carlo simulation method is more suitable.