Research On Lookback Option Pricing Based On Housing Reverse Mortgage

Since the beginning of the implementation of family planning in China,the aging of the population has become more prominent.At present,China has become a large country with an elderly population,and it has a rising trend year by year.The introduction of reverse loans has played an important role in reducing the pressure on the elderly in our society.In the housing reverse mortgage loan pricing process,the sum of the reverse mortgage loan amount and interest can be regarded as the execution price of the underlying asset,and the price at the maturity of the house can be regarded as the market price of the underlying asset.Implied in the European put options.That is,consumers(borrowers)are more inclined to buy put options and can sell at a relatively high price when house prices fall to obtain maximum profits.Conversely,banks(lenders)are more willing to purchase call options,and when the house price rises,the customer loans at a relatively low price.Therefore,this paper introduces the CIR interest rate,and based on this,uses the lookback option theory to build a lookback option pricing model based on the CIR stochastic interest rate and house price volatility models.The research work of this paper is as follows:First,this article describes the theory of housing reverse mortgages and options as the basis for deriving subsequent formulas.Then suppose that the stochastic interest rate obeys the CIR model.The floating exercise price lookback call option pricing under this model is studied,and then the parity formula of the lookback option is used to obtain the lookback put option price.Secondly,under the condition that the house price is a fast mean regression assumption,consider the case where the house price volatility meets the CIR model,and research the lookback put option pricing under the floating exercise price.Expect the price of a call option.Finally,by simulating and comparing the sensitivity parameters of European options and lookback options,the practicality and rationality of lookback options compared with European options are discusse.