Research On ETF Option Pricing Based On Simulated Annealing Algorithm-Heston Model

It has been nearly 40 years since the Chicago Board of Trade launched the world s first stock index option,the CBOE-10 index option,in 1983.The rise of the financial derivatives market has promoted financial innovations and injected new vitality into the global financial market.At present,China’s securities market is already relatively advanced,while the financial derivatives market has just entered a stage of vigorous development.On February 9,2015,the SSE launched the SSE 50 ETF option,which marked the birth of the first stock option in the domestic market;subsequently,the option on the CSI 300 ETF,on December 23,2019,was officially launched.Its emergence is a great addition to China’s financial derivatives market and significant progress.ETF options are becoming more and more one of the main investment products of interest to investors.At present,more scholars study SSE 50 ETF options,and fewer study CSI 300 ETF options,and the assumptions of the traditional option pricing models are not quite in line with the actual situation of China’s current financial market,in order to find out an option pricing model more suitable for China’s ETF options market,this paper selects the most representative Heston model after the Black-Scholes model,which is the most advanced stochastic volatility model with cross-generation progress after the Black-Scholes model,based on a systematic review of option pricing models and parameter calibration methods.In order to find a more suitable option pricing model for China’s ETF options market,this paper selects the Heston model,which is the most representative stochastic volatility model after the Black-Scholes model with cross-age progress.It is worth mentioning that the simulated annealing algorithm is utilized in the parameter calibration process of this paper,and in turn,a simulated annealing algorithm-Heston model is constructed to perform pricing experiments on our ETF options,which is constructed by combining the advantages of Fourier transform and simulated annealing algorithm.In this paper,we take Huaxia SSE 50 ETF call option and Huatai Berry CSI 300 ETF call option as the research objects,and select seven control group models,including the Black-Scholes model,Black-Scholes model under Monte Carlo simulation,ordinary Heston model,Merton model,BCC model,Heston model under Monte Carlo simulation,and least squares model,together with the simulated annealing algorithm-Heston model selected in this paper,to conduct corresponding pricing experiments on ETF options according to the daily different parameter calibration results.In the process of pricing experiments,based on the idea of proceeding from the whole to the classification,the selected ETF options by different real value degrees and different maturity dates are analyzed in detail in the classification discussion as a way to analyze the effectiveness and feasibility of the simulated annealing algorithm-Heston model in pricing the ETF options market in China.The pricing study on China’s ETF options demonstrates the applicability of the simulated annealing algorithm-Heston model in the ETF options market.In the empirical analysis of Huatai Berry CSI 300 ETF options and Huaxia SSE 50 ETF options,the simulated annealing algorithm-Heston model has been the optimal model from a global perspective compared to the seven control group models,both in terms of overall and in terms of different real value degrees and different expiration dates.With the continuous improvement of the domestic ETF options market,the pricing effect of the model may be able to be further improved.Thus,in general,the simulated annealing algorithm-Heston model performs better with respect to the pricing of ETF options in China,and the model is more applicable to the pricing of ETF options in China.