The Method And Empirical For Option Price Based On Bayesian

With the development of the financial derivatives market, the financialderivatives trading has been expanding and many new pricing methods of financialderivatives have been emerging. Over the years, many scholars in the framework ofclassical statistical model has been studied for the B-S model, there has also been someinadequacies, the stochastic both of asset prices and volatility have not been solvedeffectively. Considering the many advantages of Bayesian statisitical, this paperinvestigates the Black-Scholes option price model under the Bayesian framework toinfer the price of option. Firstly, the Fisher information matrix is used to determine thenon-informative priors both of expected rate of return and volatility on riskless assets,meanwhile the asset price and volatility are seen as random variables, then we use theprior information both of risk-free return on assets and volatility and combine with aappropriate likelihood function to derive the prior density and posterior density ofEuropean call option.This paper uses the daily closing price data of the European warrants which iscalled “AngangJTC1” as well as the daily closing price data of underlying asset to doempirical research. In aspect of calculation, the overall option of the Monte Carlomethod(MC) is more effective. Because the Monte Carlo method(MC) is suitable forthe more complex situations of the functional form of the expected rate of return andthe volatility of the under asset, the Monte Carlo algorithm(MC) is applied in thispaper to get the estimated value and other digital features of the option price, such asthe mean, variance, etc. The analysis which is based on the calculation results showsthat: with the increase of time, the convergence of option price is enhancing. Then wecalculate out a comparative analysis of the theoretical price and the actual price of thewarrants. Finally, in order to measure the deviation between the market price andtheoretical price of the warrants, we introduced the degree of deviation and carried outa further analysis. Empirical results show that: with the maturity closed, both theactual price and the theoretical price of the warrants are tend to consistent, the degreeof deviation gradually approaches to zero. The conclusions above indicate that: theexpectations of the warrants underlying stock market traders and the warrants markettraders on the underlying stock price tends to be consistent.