Study On The Validity Of Agricultural Product Futures Optionpricing Model

On March 31,2017,Dalian Commodity Exchange officially listed China's first agricultural product future option,namely soybean meal futures option.In April of the same year,Zhengzhou Commodity Exchange listed white sugar futures option.In February of 2019,the Dalian Commodity Exchange listed corn future option.All of these illustrate China's strong support for agriculture and enrich the risk management tools of China's agricultural enterprises.Compared with futures,the price insurance effect of options is stronger.Since the listing of China's soybean meal futures options for more than two years,the market transactions have been in a stable state,and there has not been any phenomenon of excessive investment by investors.The trading volume and positions have increased steadily,and the Dalian Commodity Exchange has gradually expanded the limits of its positions.Even during the Sino-US trade,weather speculation,the turnover of soybean meal has been on the rise.All of these indicate that China's soybean meal futures options have gradually played their economic role as options,it can better serve the real economy,serve the "three rural",and stabilize farmers' income.However,China's option market started late,and the choice of agricultural products has only begun to take shape.So the research on the pricing of agricultural futures options is very rare.The three classic option pricing models that we generally understand: BS model,Binary tree model and Monte Carlo simulation method are all based on European options,but in the empirical research,there is little discussion about the empirical evaluation of American option pricing.Secondly,the selection of parameters in the model is also quite random.There is no separate study for special option products.For investors,only by accurately predicting the price of the option and preparing for their own investment can they better play a role in hedging?Therefore,this paper takes the 90-day data of the three series of M1807-C2400,2500 and 2600 of China's soybean meal futures options from January 22,2018 to June 7,2018 as the analysis sample.Firstly,based on BAW model,binary tree model and LSM model with futures margin and fee factors,using the same risk-free interest rate,volatility and other parameters to analyze which model is more suitable for China's soybean meal futures options.In this part,the evaluation criteria are regression analysis and index analysis.The conclusion of this part is LSM model is not suitable for pricing China's soybean meal futures options;Then it is based on the previous part to analyze which volatility and risk-free interest rate is more suitable for BAW or CRR model pricing for soybean meal options.This part is evaluated by indicator analysis method.The conclusion is that the CRR model under the one-year fixed deposit rate and the volatility rate of the GARCH model fitting has the smallest pricing error.So based on the previous part the CRR model with the smallest pricing error is selected to analyze whether joining the futures margin and Exercise fee can improve the pricing efficiency.Efficiently,it is concluded that the pricing error of the model after adding the deposit and the fee is less than the model which do not add the futures margin and Exercise fee.Finally,the core part of the paper also makes corresponding recommendations based on the conclusions and the development of the options market.