A Study On The Valuation Of Leveraged Fund Based On Option Pricing Theory

An accurate valuation of leveraged fund is very important both theoretically and practically. This paper introduces the basic concepts and categories of leveraged fund, as well as reviews the current development and research of leveraged fund. Then we introduce the most commonly used two methods-the B-S option pricing model and the Monte Carlo simulation-to evaluate some of the domestic stock index leveraged funds using the SHIBOR annual rate, the index return and the volatility of the index return.This paper focused on three leveraged funds, namely the Guotouruiyin300, the Shuangxi100 and the Yinhuashenzhen100. In order to select the optimal valuation methods for different types of leveraged funds, we analyze the difference between the valuation results and the NAV or market price. The results show that although the scope of B-S option pricing method is very limited, the results are very close to the actual world; while using Monte Carlo simulation, the results are more volatile. It is applicable to class A shares that are index dependent and class B shares. However, it does not apply to fixed income class A shares.