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Empirical Research on Chinese Warrants Market Based on the Montecarlo Pricing Options Under Levy Process

Received: 4 May 2015     Accepted: 13 May 2015     Published: 27 May 2015
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Abstract

After the 2008 financial crisis, the global derivatives trading volume in options proportion is growing, more and more investors build portfolios using options to hedge or arbitrage, our futures and stock options will soon open. Theoretical research of options is also changing, option pricing models under Levy processes developed rapidly. In this context, a review of the China's warrants market and the introduction of option pricing models can not only help us to reflect Chinese financial derivatives market regulation, but also to explore the option pricing theory for China’s financial market environment. In the framework of Monte Carlo simulation pricing,we established mufti-Levy process option pricing models, the structural model for the given parameter estimation and risk-neutral adjustment method are discussed, the last part of this chapter is an empirical analysis of China warrants trading data in order to prove the validate of Levy models.

Published in American Journal of Applied Mathematics (Volume 3, Issue 3)
DOI 10.11648/j.ajam.20150303.19
Page(s) 129-137
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Levy Stochastic Processes, Option Pricing Models, Chinese warrants Market, American Option Pricing, Risk-Neutral Adjustment, Variance Reduction Techniques

References
[1] Box G, Mervin E. Muller. A note on the generation of random normal deviates[J]. The Annals of Mathematical Statistics, 1958, 29(2): 610-611.
[2] Boyle P. Options: A Monte Carlo approach[J]. Journal of Financial Economics, 1977, 4(3):323-338.
[3] Broadie M, Yamamoto Y. Application of the fast Gauss transform to option pricing[J]. Managment Science, 2003, 49(8): 1071-1088.
[4] Broadie M, Yamamoto Y. A double-exponential fast Gauss transform for pricing discrete pathdependent options[J]. Operations Research, 2005, 53(5): 764-779.
[5] Byun SJ, Min B. Conditional volatility and the GARCH option pricing model with non-normal innovations[J]. 3ournal of Futures Market, 2413, 33(1): 1-28.
[6] Carr P, Madan D B. Option valuation using the fast Fourier transform[J] Journal of Computational Finance, 1999, 2(4): 61-73.
[7] Carr P, Geman H, Madan D H and Yor M. The fine structure of asset returns: an empirical investigation[J]. Journal of Business, 2002, 75(2): 305-332.
[8] Carr P and Wu L R. The finite moment log stable process and option pricing[J]. Journal of Finance, 2003, 58(2): 753-777.
[9] Carriere J F. Valuation of the early exercise price for options using simulations and nonparametric regression[J]. Insurance: Mathematics and Economics, 1996, 19(1): 19-30;
[10] Carrosco M, Chernov M, Florens JP, Ghysels. Efficient estimation of general dynamic models with a continuum of moment conditions[J]. Journal of Econometrics, 2007, 140(2): 529-573.
[11] Chen Z, Feng L and Lin X. Simulating Levy process from their characteristic functions and financial applications[J]. ACM Transactions on Modeling and Computer Simulation, 2012, 22(3).
Cite This Article
  • APA Style

    Li Zhou, Hong Zhang, Jian Guo, Anjie Deng. (2015). Empirical Research on Chinese Warrants Market Based on the Montecarlo Pricing Options Under Levy Process. American Journal of Applied Mathematics, 3(3), 129-137. https://doi.org/10.11648/j.ajam.20150303.19

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    ACS Style

    Li Zhou; Hong Zhang; Jian Guo; Anjie Deng. Empirical Research on Chinese Warrants Market Based on the Montecarlo Pricing Options Under Levy Process. Am. J. Appl. Math. 2015, 3(3), 129-137. doi: 10.11648/j.ajam.20150303.19

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    AMA Style

    Li Zhou, Hong Zhang, Jian Guo, Anjie Deng. Empirical Research on Chinese Warrants Market Based on the Montecarlo Pricing Options Under Levy Process. Am J Appl Math. 2015;3(3):129-137. doi: 10.11648/j.ajam.20150303.19

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  • @article{10.11648/j.ajam.20150303.19,
      author = {Li Zhou and Hong Zhang and Jian Guo and Anjie Deng},
      title = {Empirical Research on Chinese Warrants Market Based on the Montecarlo Pricing Options Under Levy Process},
      journal = {American Journal of Applied Mathematics},
      volume = {3},
      number = {3},
      pages = {129-137},
      doi = {10.11648/j.ajam.20150303.19},
      url = {https://doi.org/10.11648/j.ajam.20150303.19},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajam.20150303.19},
      abstract = {After the 2008 financial crisis, the global derivatives trading volume in options proportion is growing, more and more investors build portfolios using options to hedge or arbitrage, our futures and stock options will soon open. Theoretical research of options is also changing, option pricing models under Levy processes developed rapidly. In this context, a review of the China's warrants market and the introduction of option pricing models can not only help us to reflect Chinese financial derivatives market regulation, but also to explore the option pricing theory for China’s financial market environment. In the framework of Monte Carlo simulation pricing,we established mufti-Levy process option pricing models, the structural model for the given parameter estimation and risk-neutral adjustment method are discussed, the last part of this chapter is an empirical analysis of China warrants trading data in order to prove the validate of Levy models.},
     year = {2015}
    }
    

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    T1  - Empirical Research on Chinese Warrants Market Based on the Montecarlo Pricing Options Under Levy Process
    AU  - Li Zhou
    AU  - Hong Zhang
    AU  - Jian Guo
    AU  - Anjie Deng
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    DO  - 10.11648/j.ajam.20150303.19
    T2  - American Journal of Applied Mathematics
    JF  - American Journal of Applied Mathematics
    JO  - American Journal of Applied Mathematics
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    EP  - 137
    PB  - Science Publishing Group
    SN  - 2330-006X
    UR  - https://doi.org/10.11648/j.ajam.20150303.19
    AB  - After the 2008 financial crisis, the global derivatives trading volume in options proportion is growing, more and more investors build portfolios using options to hedge or arbitrage, our futures and stock options will soon open. Theoretical research of options is also changing, option pricing models under Levy processes developed rapidly. In this context, a review of the China's warrants market and the introduction of option pricing models can not only help us to reflect Chinese financial derivatives market regulation, but also to explore the option pricing theory for China’s financial market environment. In the framework of Monte Carlo simulation pricing,we established mufti-Levy process option pricing models, the structural model for the given parameter estimation and risk-neutral adjustment method are discussed, the last part of this chapter is an empirical analysis of China warrants trading data in order to prove the validate of Levy models.
    VL  - 3
    IS  - 3
    ER  - 

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Author Information
  • School of Information, Beijing Wuzi University, Beijing, China

  • School of Information, Beijing Wuzi University, Beijing, China

  • School of Information, Beijing Wuzi University, Beijing, China

  • School of Banking and Finance, University of International Business and Economic, Beijing, China

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