Tiered Fund Pricing: Volatility, Barrier Options, And Monte Carlo Simulation

Structured fund is a kind of innovative leveraged investment tools in financial market,it consists of two parts,respectively for rating fund A share which is also called steady share,preferred shares or low risk share,and hierarchical B share which is also called enterprising share,share or high risk share.The investors can undertake choosing according to the different risk preferences.Structured fund has a more complex product structure than other funds,with unique leverage mechanism,conversion mechanism and matching conversion mechanism,which can be divided into different categories according to different classification criteria.Structured fund started the domestic structured fund market officially in 2007,and in 2015 it ushered in the climax of blowout development.However,due to its unstable price and large fluctuation,which led to investment risks and market volatility easily,its market share decreased sharply after 2018.Up to now,the development of structured fund in the financial markets has a certain market position,so in order to increase the market vigor of structured fund and provide a reference for the future possible other leveraged products in financial market,this paper decided to take the pricing of structured fund as a starting point and use accurate and reliable pricing methods to predict fund price trend in order to reduce investment risk,in hopes to reduce investment risk and provide feasible research methods in decision-making reference and policy suggestions for investors and fund managers.In the present study,the setting of volatility was too simple,and the artificial avoidance of fund conversion mechanism during the selection of the study resulted in a large error in pricing results.The majority of target funds were classified stock funds,and the method was not universal.For this,this paper selects three representative fund,including two grade stock funds and a classification of bond funds,and carries on the expansion of existing research from two aspects,one is using GARCH model to improve volatility,the second is the introduction of barrier options to solve the problem of the subjective choice the fund conversion period,on this basis,using monte carlo method for stock and bond rating fund,respectively,for historical volatility and improve the two theories under the price,with the actual price unified graphic analysis,and the fit of the actual price and the theoretical price of the come to a conclusion: The theoretical price trend under the historical volatility is single,which has a big gap with the actual price.Although there is still a certain gap between the theoretical price and the actual price,the improved GARCH model conforms to the actual price trend on the whole and has a high fitting degree.Investors and fund companies can reasonably use pricing methods to predict price trends,take effective measures to avoid excessive losses,and maintain fund operation and market stability.