Research On The Pricing Of Executive Stock Option Based On GARCH Model Cluster And Two Cross Tree Model

With the development of economy,the executive stock option system have could as an incentive method to solve the contradiction between the owner and the manager by many enterprises. At the same time,the system itself is increasingly perfect with the development of the financial market, the improvement of business philosophy. Options as a common financial derivative products,it has the characteristics of the right to choose,so that it can be very good to regulate the relationship between the enterprise and its managers.What fully understand how the executive stock option system is to play its incentive role,and the incentive system and the development of the enterprise organically combined together to improve the organizational structure of the enterprise is a very important task presently.This paper begins with the definition and characteristics of executive stock options and introduces the generation and development of executive stock options. Through the understanding of the structure of the value of the stock options to make the option pricing more accurate and to understand the impact of stock options to determine the pricing of options, The two fork tree model and the GARCH model cluster theory are applied to the manager stock option pricing.In this paper,the Eastern wealth and Vanke A shares as the research object,and research on the pricing of executive option incentive system of two enterprises. Through the GARCH cluster model and the two fork tree model to calculate the option value of the two enterprise’s option incentive system,in order to reduce the cost of enterprise management and cost. So this paper through GARCH model to analyzes the volatility of Composite Index. Therefor,this paper selects the Shanghai index so far in 2013, through the GARCH model to analyze the volatility of the index.The results show that in the analysis of GARCH,TGARCH, EGARCH three models,EGARCH model is more in line with the fluctuation of the Shanghai index. EGARCH model is more consistent with the volatility of the Shanghai Composite index. In this paper, the EGARCH model is used to predict corporate stock price volatility can eliminate the effect of a part of the broader market volatility of individual stock and eliminate the factors of certain system fluctuations. Therefore,this paper uses the model to predict the stock price volatility of Eastern wealth and Vanke A shares. The Matlab software is used to multi time two tree model programming and calculate the value of executive stock options whose Step number is set to 1000 steps,this way can make it more accurate to calculate the value of stock options.Finally,this paper uses Delta value to detect the impact of changes in stock prices on the value of options,When the value of Delta is greater,the impact of stock price changes on the value of options is greater,the incentive effect of executive option is more significant,Conversely Delta value is smaller,the incentive effect is not obvious. Enterprises can be based on two kinds of pricing model Delta value of the comparative analysis to help enterprises to develop more effective incentive system.We draw curve chart of two models Delta value to judge the incentive effect of the two the stock option pricing models.