Research To The Structured Mutural Index Fund Pricing

The structured mutual fund is developed from the traditional public funds.Through dividing the fund’s net value into two or more parts and giving them different expected return and risk, this kind of structured financial products could satisfied investors’ diversified demands. With the stock market booming,the size of structured mutual fund appears explosive growth and the structured mutual fund based on equity index are the species. This kind of structured mutual fund is divided into two sub-shares, with a variety of features, such as dynamic financial leverage,irregular conversion,pairing conversion mechanism,long-term premiums or discounts.According to different income distribution and irregular conversion,this paper selected two representative fund of them for pricing research. Previous research mainly converted it to a European option and pricing it with Black-Scholes model or Monte Carlo simulation methods. However,the structured mutual index funds with irregular conversion and no expiry date is a permanent barrier option.Since the barrier option is difficult to be solved by Black-Scholes model and requires a lot of computing time to be solved by Monte Carlo model,this paper constructs a finite-state approximate Markov Chain and use it to solve the barrier option problem. Moreover,by adding the market sentiment factor, we get a better empirical result,which has a better goodness of fit than the net asset value and provides investors a better reference standard.