Pricing And Volatilitly Smile Research For 50 ETF Option Based On Stochastic Volatililty Model

Being the first stock index options in Chinese market,50ETF options are very popular among investors. Although investors are benefit from the market due to the high leverage of the options, they can lose a lot if they ignore the volatility dynamics of the options. In order to avoid the risks, this paper focused on managing the smile risks of 50ETF options. Using 50ETF option data, we compare the accuracy of SABR model and Heston model. It turns out that some parameters fits well, such as ? in SABR model,?,?1and??in Heston model. After getting the parameters, this paper got the option prices and volatility smile from SABR model and Heston model. The results show SABR model fits 50ETF option market will, and it is a good choice for managing smile risks in Chinese option market.