Study On Options Pricing Based On Actuarial Method

Both options pricing method and insurance algorithm are to better solve the pricing problem,but with the development of economy,especially the rapid advance of financial market,the traditional options pricing method has gradually not keep pace with the progress of the times,the disadvantages are becoming more and more obvious.On the other hand,with the rapid rise of the insurance market,the competition among insurance companies is becoming more and more fierce,more and more types of insurance are available on the market,insurance rates,the accuracy of the cost of the requirements of the increase in the number of insurance fees,and there is also a dividend problem.Based on the above reasons,this paper will consider the application of insurance actuarial method after the dividend factor to the option pricing to try to integrate them better,so as to make the pricing more accurately.Firstly,this paper introduces the research background and the significance of the research on the basis of the domestic and foreign literatures.Secondly,it introduces the options pricing knowledge,including the definition of options,the development of options pricing theory and the five methods of options pricing--traditional B-S pricing method,binary tree option pricing model,finite difference method,Monte Carlo simulation method and martingale method.Then is the comparison analysis of the actuarial method and option pricing method,the most important point is the analysis of the pricing principle.The principle of actuarial valuation is based on the law of large numbers,which results in the expected loss from the infinite number of units.The principle of option pricing is no arbitrage equilibrium theory,through the construction of risk-free portfolio or split to complete pricing.The two appear to have nothing to do but through fair premium principle can transform options into insurance issues,thus establishing a link between the two to set the stage for the following.Finally,the thesis focuses on the derivation and numerical verification of the pricing model.This chapter is based on the research of Zhenghong and others.In this paper,the option pricing problem is derived from the consideration of dividend,and through making a series of numerical assumptions,the premium is calculated in the pricing model of bonus factor and the pricing model of non-dividend factor respectively.Furthermore,using Eviews software to analyze the calculation value and the actual value of the premium,it is found that there is a good fit between the two,so as to further confirm the method.At the end of this paper,based on the conclusion of the previous article,we hope that the option pricing model can be applied in many fields and better developed in the near future.In addition,the innovation of this paper lies in the derivation of the option pricing model,which takes into account the bonus factor,and its application in property insurance pricing.Of course,based on the above research,there are many shortcomings,such as the article only for the analysis of European options,without taking American options into account,which is the direction of improvement.Finally,we hope that the option pricing model under the insurance precision algorithm can be extended and this method can play an important role in solving the pricing problem.