Research Of Measuring The Option Risk

Since Black-Scholes option pricing model appeared in 1973, the research of pricing option and measuring of option risk is being developed constantly. But at present, research in our country only stays on measuring market risk of the traditional financial instrument. According to measuring market risk of financial derivative market, especially the research of measuring the option risk, research in our country just stagnates in introducing the foreign researcher's achievements, and there are some mistakes among them, so it demands innovation urgently in both theory and practice. In addition, because of without option market in our country at present, this paper as perspective research can provide certain reference for finance derived product researcher and designer of our country on the theory and practice.This paper is on the basis of studying domestic and international option pricing and financial market risk management theory, uses the major method of measuring the risk of financial market at present —VaR, studies the market risk of the option overall, has made some break-throughs in two respects of the theory and real example.By introducing the option and development of option market and analyzing the characteristic of several kinds of typical options, this paper clearly points out several important factors which influence the option price, and indicates the market risk of the option. Then on the basis of introducing definition and characteristic of VaR, this paper indicates the mistakes of calculating the VaR formulae of European call and put option in the documents gathered and corrects them.Using the closing price of Shanghai Stock Index between May 22, 1997 and March 23, 2004, which add up to 1641 data, this paper studies on simulation option. It concludes that the yield of Shanghai Stock Index doesn't obey normal distribution and its volatility demonstrates volatility clustering. So, this paper selects suitable model GARCH (1, 1) to fit the yield volatility.Then the paper designs C, C++ procedure and analyses the risk state of the option, and solves the value of the VaR formulae of Shanghai Stock Index Option by combining the condition established beforehand and VaR formulae derived out. Finally, the paper analyses the result and concludes the VaR formulae derived out in the paper are more excellent in measuring market risk of the option.