Empirical Analysis Of Two Option Pricing Models

Options are financial derivatives widely used in modern international financial markets and are an effective tool for financial risk management.With the development of China's financial market,more and more financial derivatives are being launched in China,s financial market.At present,there are seven different types of option in China's financial marketA key issue about options is its pricing in the financial markets.There is a lot of work in the literature on the pricing theory of options.It is an important practical work to try to apply the option pricing theory to the pricing of option products in China,s financial market.The most famous in the option pricing theory is the classic B-S-M pricing formula.Later,some scholars considered the impact of the economic cycle on the option price.Based on the B-S-M pricing formula,an option pricing formula with regime switching was established.Based on the first option in China,the SSE 50 ETF option,this paper empirically compares the specific pricing effects of the two models.First,using the yield series of the SSE 50 ETF to estimate the parameters of the two pricing models,and the option pricing formula gives the theoretical price of the SSE 50 ETF option contract,and then we selects the appropriate error metric to compare the two theoretical price with the actual market transaction price,and concludes that the theoretical price of the option pricing model with mechanism conversion is closer to the actual transaction price.