A Study on the Applicability of Black-Scholes Option Pricing Model in Chinese Stock Index Option Market

Shihan Wang

doi:10.54691/bcpbm.v35i.3351

Authors

Shihan Wang

DOI:

https://doi.org/10.54691/bcpbm.v35i.3351

Keywords:

Black-Scholes Model; Fitting Degree; Deviation; Applicability.

Abstract

Compared with the developed countries, Chinese stock index option market developed late and accumulated less historical data. At the same time, it has the characteristics that many developed countries' stock option markets do not have. Black-Scholes Model is an important model in the field of option pricing. It is not enough for a financial model to be reasonable in theory, but it needs to be tested by the actual market. Therefore, based on the main transaction data of the CSI 300 stock index option contracts from 2010 to 2020, this paper analyzes the compliance of the CSI 300 stock index option market to the basic assumptions of the B-S option pricing model, the main parameters of the CSI 300 stock index options in the B-S option pricing model, and the fitting degree of the B-S model's prediction and actual prices. The result shows that there is a certain deviation between the pricing conclusions of the B-S model and the actual option prices. This paper analyzes the reasons for the deviation from many aspects, and puts forward the corresponding improvement strategies that the users of the model should adopt, so as to improve the applicability of the B-S option pricing model in Chinese stock index option market.

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