Research On Trading Strategy Of SSE 50ETF Opitons Based On SABR Model

As one of main derivatives,option is important to the whole financial market.So,the pricing of option is the most concerned problem of the whole academia and industry,and the core of this problem is the estimation of volatility.Since the Black-Scholes Model came out,many researchers aim to loosen the constant volatility condition of Black-Scholes Model,and lots of stochastic volatility models were published.SABR is a two-factor stochastic volatility model which has been proved to be effective and steady after calibrate the SABR parameters by the market volatility curves.This dissertation has researched the applicability of SABR model in China's market based on the high-frequency trading data of SSE 50 ETF options during 2016-2017.In general,SABR model can give a nice fit of implied volatility smile after choosing the suitable parameters and provide effective references of option pricing and hedging.Then,this dissertation has provided an effective option volatility trading strategy based on the estimation of implied volatility from SABR model.This strategy has good result in series of back tests.And we have explored the difference of the results under different parameters.Finally,this dissertation has researched the option Delta hedging based on SABR model.It has shown that Delta from SABR model is more effective than that from Black-Scholes model which has further confirmed the validity of SABR model's estimation.