The Study On The Pricing Of A BOC Financial Product-Applying Barrier Option Method

With the high development of global economy,nowadays,Internet financial innovations drive the comprehensive development of financial market.A large number of structuring finance products appear gradually.Its essence is to take service innovation and products innovation on the foundation of traditional fixed income products,and it brings many challenges to the business of Commercial Bank.From the end of last year,the Central Bank issued the reduction of interest and once reduction of standard,which indicates that our country will conduct properly flexible policy to lead the enlargement of credit quota and financing scale and thus develop the market-oriented economy healthily and placidly.Therefore,more and more investments are not satisfied with the lower deposit of the Commercial Bank but more tend to invest some structuring finance products with higher profits and lower risk.Therefore,it can be seen that it has certain research significance whether the pricing is reasonable and the prospective earnings can satisfy the investors.Firstly,analyzing the structuring finance products,especially the structuring products features concerning exchange rate and exotic option,the existing problems in the aspect of developing structuring finance product market is put forward.Secondly,reviewing and summarizing the current research by the domestic and overseas scholars as well as the pricing process of structuring finance products involved with basic theories and pricing methods are introduced.By comparing the theories with methods,Black-Scholes-Merton differential equation model is selected to take an empirical analysis.The key part of this paper is the fourth chapter,which carries out full empirical study to the pricing of structuring financial products of BOC.There are two parts for the pricing of structuring finance products,one is regular bond value and the other is the value of Up-and-in Call.In the derivation of pricing model process of Up-and-in Call,this chapter focuses on the calculation of the pegged exchange volatility of GBP to JPY by GARCH model,so all variables of option pricing models are known.Through applying MATLAB to achieve the resolution of Black-Scholes-Merton differential equation model of option pricing models,the real value of the product can be obtained and premium issuing phenomenon can also be discovered.After that,combined with the result of the empirical studies,it analyzes the practical application of the results mainly manifests in the sensitivity analysis and implied volatility.The last part is the prospect of the development of domestic structuring finance product market and the shortcomings of the study.The innovation of this paper is using GARCH model to predict the fluctuation range of volatility,and using this fluctuation rate to the option value of the resolution of Black-Scholes-Merton differential equation model.By applying the empirical analysis methods of concrete products,it has a certain guiding significance for investors to know and invest structuring finance products.