| Option is one of the most major innovations in the 1980s and it turned out to be the most liquid financial derivatives and effective risk management tools in recent years. The trading volume last year reached 9.36 billion contracts in total, which is 53% in proportion of all derivative products. Nearly all exchange centers worldwide are trading options now.In China, it is necessary to use derivatives as a tool to manage financial risk along with the rapid development of China's capital markets. Although stock warrant market has been running normally for years, and stock index futures are also well prepared, some are still arguing that stock options will make some negative effect.Lots of literatures abroad have studied the impacts of options on the efficiency, liquidity and volatility of the stock market. However, due to the specific characteristics of China's market-short history, small and media investors as the major player, deficient market structure, etc.—those conclusions abroad might not be applicable in China. Now, research options, the impact of the introduction on China's stock market, for the formulation of policy options and provide a theoretical basis for product development, has important practical significance.This paper has established a theoretical model to analysis the impact of option on the behavior of the market trader and investor on the base of studying the impact of introducing option on stock market and also considered the condition and features of our capital market. This paper's studying method is by using the relative theory of financial mathematics to abstract the features of financial market and conclude a theoretical model. We will interpret the impact of introducing option on our stock market through the process of deducing and analyzing the theoretical model along with the conclusion reached by the statistics of our country's financial products trading in order to provide some persuasive conclusions for making the relative politics.Firstly our country's financial product has only a few types and individual and medium-sized investors who are in asymmetric information status take a higher proportion. We divide China stock market into three typical period, unilateral rising(or declining), turning point and stable trading. Thus will introduce the parameter of investor discrepancy expectation to establish a two-phase with multi-assets discrete financial model.Secondly we will conclude that the impact of introducing option is in relation to the status of the market. When the market is in a status that there is arising(or declining) in one direction or turning point, the option will help to encourage speculation; when the market is in a stable status, the option will help the market to reach a equilibrium stock price consequently strengthening the stability of the market and also will expand the demand for trading the stocks and bonds. After introducing option we can improve the expectative effectiveness of investors by appropriate system design such as appropriate option deliver price. The equilibrium will be stable after introducing option and will not be broken by disturbance with the feature of self retrieval.Thirdly we will relieve the parameters of the model such as effectiveness function, assets amount and stock price etc. to make the simplified model more close to the real market environment to make the conclusion has adaptation. The conclusion has expressed that the model can be implement by the normal form effectiveness function. After introducing options the market still has only one equilibrium price and when the amount of assets and status of the market increase within definite scale the conclusion still works.Finally we use stock warrant as a sample due to its characters close to option to study the impact on stock market from the aspects of liquidity, volatility and market efficiency to forecast the impaction after introducing option. We use event analyzing, Granger test and two-binary GARCH method as our tools based on stock warrant collectivity and frequently used data. Our results show that volatility of the stock market will decline due to the introduction of warrants and trading risk of stocks (measured by its beta) will increase. Liquidity of the stock market increased significantly in short term after the launch of warrants and so for stocks turnover rate (which is also a measure of liquidity), but not apparently for the stock trading volume in the long term. As for information delivering efficiency, Granger test and two-binary GARCH all show there is an apparently interactive relationship between warrants and their underlying stocks. This facts imply option trading will provide new information for investors to pricing the stock so improving the stock trading efficiency.In sum, this dissertation from two complementary research point, the theoretical model and similar products empirical test, shows that in China the introduction of options will increase market liquidity, reduce stock volatility; improve market efficiency and the welfare of investors. Meanwhile, the study found that the introduction of options may also bring some negative effects, such as the Beta coefficient may increase the stock, options to introduce the right time may pose the risk of speculation, the system designers need to attract attention.Based on the above findings, the following policy recommendations: First, the introduction of options trading as soon as possible to enrich the market products, improve the financial market system; Second, timing of introduction of options should also be considered to avoid strongly different views of investors on stock prices and prevent the risk of market speculation, thus we suggest launching options in a stable market; Third, option initially, in order to reduce incentives for investors to trade options, it is recommended to enhance investor education, design qualified investors system. |
