| Rapid development of the world economy is allowing financial markets an enormous boost. China began to attempt all kinds of financial derivatives in the 1990 s. Marked as a symbol, the initial FX future released in 1992 opened the way of the Chinese financial derivatives market. However, at that time, insufficient laws and regulations as well as some unprofessional investors led to a chaotic market environment in which violations occurred often. Without effective measures, regulators had to cancel some newborn derivatives to prevent abuse. Owing to Chinese economic reform policies, China’s high growth financial community and economic scale, financial derivatives continued to be in high demand by enterprises and financial institutions.Stock option, which is otherwise known as stock warrants in China, is a kind of the most important financial derivatives. Unfortunately, the warrants market narrowed due to market turmoil. On February 9, 2015, Shanghai Stock Exchange relaunched its SSE 50 ETF option,making a brand new start for Chinese financial derivatives market. In order to avoid market turmoil, investors had an obligation to understand stock options pricing mechanism.B-S model and Monte Carlo method are used to theoretically evaluate stock options. The price of a stock option will be compared with its actual price to select a more sufficient method for stock option pricing.The underlying asset of 50 ETF option is 50 ETF fund; it has dividends in the last few years.Therefore this paper adopts the modified B-S option pricing m odel with dividend payout ratio. In the Monte Carlo pricing model, the independent variable is the price of underlying asset and the simulation times are 400. Then it compares the theoretic al price with the actual price by regression analysis and index analysis. The empirical study sh ows that the pricing efficiency of B-S pricing model is better than Monte Carlo pricing model.The put option is more easy to price than put option. |
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