European Option Pricing

With the rapid development of national economy, the financial market plays a more and more important role, stocks, bonds, already can’t satisfy people’s needs,financial derivatives such as futures and options gradually appear in the line of sight of people, as an important component of financial markets, has been more and more people pay close attention to. At present the study of financial derivative products,mainly includes two aspects, one is the innovation of the financial derivatives, satisfy people’s demand for investment; The second is financial derivatives pricing.Options as a kind of typical financial derivatives, option pricing model.Especially in 1973 the most famous is fischer Black and myron Black- Scholes formula are presented, and therefore the Nobel science prizes. European option is one of the most simple options, even we can use the formula of European option price directly, but there are many complex options on the market, the European option pricing model can provide some reference for other options. This article mainly discuss the European option pricing model and its analysis method, this paper discusses the theory and case analysis, and considering the stock dividend factors,and some simple conclusions.This article mainly includes five aspects. First, the paper selected topic background and the research achievements of predecessors; Second: option, the foundation of knowledge, understand the options related definitions; Third: binary tree model, and in turn 1 share price movement is given more than one period, two periods and issue of the European option pricing formula; Fourth: to know the Black- Scholes model, learn to use Black- Scholes formula for the option price; Fifth: the binary tree model and the numerical method and the effect of dividend; Six:summarize and draw some conclusions in this paper. This paper focuses on the option pricing model and analytical method of the discussion and analysis, through the example is given to illustrate its application, but theoretical breakthrough.