Pricing And Empirical Analysis Of Chinese Copper Option Market

On September 21,2018,the Chinese copper options contract was officially listed on the Shanghai Futures Exchange,becoming the first industrial product option in China and the third option in the domestic futures market.It helps to consolidate the position of the Shanghai Futures Exchange in the world's three major copper pricing centers.The copper options has important practical significance in the service industry risk management.The core of copper futures option research is its pricing problem.The price change of copper futures directly affects whether the relevant option pricing model works.Firstly the paper introduces the theoretical knowledge in option pricing,including the concept of fractional Brownian motion,stochastic volatility,Black-Scholes model,BS model based on fractional Brownian.Secondly,it introduces R/S analysis method in fractional Brownian motion BS model,with the principle of the R/S analysis method and how to use R/S analysis method to estimate the Hurst index.Thirdly,the volatility estimated by the GARCH(1,1)model replaces the historical volatility of copper futures,so the paper will introduce the theoretical knowledge of the GARCH(1,1)model.In the empirical research part,through the programming of SAS,MATLAB,EVIEWS.,the copper futures price Hurst index,GARCH(1,1)volatility,BS option price,BS-H option price are obtained.Comparing the BS option price and the BS-H price with the actual price,the option price based on the fractional Brownian motion(BS-H price)is generally more effective than the option price of the BS model.According to the fractional Brownian motion model,the strategy of enterprise hedging in the market is given.Therefore,it is considered that this paper has theoretical significance for the option hedging of enterprises and the improvement of China's copper option market.