Research On Pricing Of SSE 50ETF Options With Realized Volatility Measurement Error

Option pricing is one of the important research topics in modern finance,and how to price options reasonably is the core of its role in risk management.Estimates of the volatility of the underlying asset are critical in option pricing.Compared with lowfrequency data,high-frequency data contains more information on intraday fluctuations,and the use of high-frequency data can better observe the real fluctuations of asset prices.Numerous studies have modeled and predicted realized volatility based on highfrequency data,but few have applied it to option pricing.This paper considers the effects of jumps,positive and negative volatility,and measurement errors on the realized volatility model,and extends the realized volatility measurement error to the option pricing model.The empirical part uses the high-frequency data of the SSE50 ETF to calculate the realized volatility to test the prediction effect of the model,and verifies the pricing power of the model on the SSE 50 ETF option.In the construction of realized volatility model,this paper firstly constructs several realized volatility models according to the jumps,positive and negative fluctuations of realized volatility,and further studies the influence of measurement error on model prediction.The empirical results show that the introduction of measurement error improves the model’s ability to predict realized volatility to a certain extent.In the option pricing part,this paper selects SSE 50 ETF option data in 2021 and classifies the data according to option types,expiration time and real/virtual value degree.Through descriptive statistics of various types of options,it is found that SSE50 ETF options have obvious "volatility smile" characteristics.Furthermore,this paper studies the pricing of SSE 50 ETF options using traditional models and realized volatility models respectively,and discusses the pricing ability of different models under different types of options.Combined with the statistical data of implied volatility of various types of options,it is found that in the options with high implied volatility,the pricing effect of realized volatility model is better than the traditional model,and the realized volatility model with measurement error is significantly better than the model without measurement error.