Author(s)

Wanting Hu

School of Econmics, Jinan University, Guangzhou, China.

A reasonable option trading price will have certain guiding significance for option traders. Fractal B-S model and GARCH model are common pricing methods. This article explores which pricing method is more reasonable based on SSE 50ETF options. Due to the spikes and thick tails, conditional heteroscedasticity, and fractal characteristics of the SSE 50ETF option yield data, this paper performs stationary test, autocorrelation and partial autocorrelation test, ARCH test, and Hurst test on the daily sample rate series of the target sample. The characteristics of the yield sequence are used to construct a GARCH model and predict the daily rate of volatility. Finally, the volatility predicted by the GARCH model is used as the parameter value in the fractal Brownian motion option pricing method to realize the option pricing. At the same time, this paper calculates the pricing results of the BS option pricing method based on historical volatility, and compares the two options pricing results with the closing price of the option transaction price. The results show that the prediction of the Shanghai Securities 50ETF option pricing method based on the GARCH fractal Brownian motion model. The accuracy is significantly higher than the standard BS option pricing method.

Fractal Brownian Motion, GARCH Model, SSE 50ETF Options, Volatility Prediction, Improved B-S European Option Pricing

Hu, W. (2020) Research on Pricing of Shanghai 50ETF Options Based on Fractal B-S Model and GARCH Model. Modern Economy, 11, 407-425. doi: 10.4236/me.2020.112031.