The Pricing Of Stock Index Future Barrier Option And Application To Risk Management

The thesis proposes the pricing formula of stock index futures barrier options by the use of Martingale method. Meanwhile, it also elaborates the application of stock index futures barrier options in risk management. The main purpose is to guarantee the downside risk which is caused by the value of asset portfolio fallen. In this paper, I present an insurable notion for stock index futures barrier options, therefore, the insurance will start and ensure the profits of the investors when the price of stock index futures encounters a barrier.Based on the practical issues, the thesis defines martingale measure Q with the utilization of the Girsanov theorem under the mathematical model of the stock price which is submit by Geometric Brownian motion. Under this measure, we can get the price formula of stock index futures barrier options by the use of option pricing martingale method.Option is an effective tool for risk management. In the actual financial markets, however, risk management is often restricted due to the limited types of options. In order to achieve the purpose of the asset portfolio insurance, you can use an asset portfolio to copy an option. Due to the option which used CSI300index futures as a protogenetic asset is not exist, so this paper will copy it by the use of stock index futures and risk-free debenture, then calculating the share of stock index futures called Delta. Subsequently, it elaborates the implementary strategies of risk management when whether the stock index futures barrier options exist or not.