Research And Application Of The B-S Model

Since the70s, international financial system have taken a great change alongwith the computer communication technology and the development of economicglobalization.The financial derivative products which base on the money, stocks,bonds and other traditional financial products has made great development. Optionand derivative which belongs option class are complex and various. Because theyhave a good structure characteristics, they are widely used in risk management andproduct development design. Option holders have the right to sell or buy a certainnumber of foundation assets as exercise price in the expiration date. Option trading isthe buying or selling of the option. Warrant is a special kind of option.Which issuedby the issuer of the foundation assets or the third person.The holders have the right tosell or buy securities or settle by cash. The most difference between warrant andexchange option is: exchange option is a standard contract but the warrant is a issuer’scontract.The issuer need to bear all the responsibility.Option has a certain value. A large number of domestic and foreign scholars andexperts have studied on the option pricing theory. In1973, Black, Scholes and Mertonthese three great person developed Black-Scholes model (B-S model). It is a majorbreakthrough in the option pricing field. This model is widely studied and applied inoption pricing.In the B-S model,suppose volatilityσ and interest rate are constant, and all of thedue date are the same, but the reality is not so.I uses a new method to derive B-S formula in this paper. Analysis the effects ofvarious parameters. And use B-S model to get bonds and warrants pricing. The fulltext is divided into four chapters:The first chapter: introduce the main research results of some experts andscholars in this respect, the concepts and lemma of related to this article.Chapter two: using a new method to obtain the B-S pricing formula.Chapter three: to obtain the effect of the various parameters by analyzing eachparameter on option price effect.Chapter four: the specific application of B-S model.