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Applicability of Actuarial Method to Option Pricing

Authors
Publisher
城西大学
Publication Date
Keywords
  • Option Pricing
  • Black-Scholes Formula
  • Actuarial Method
Disciplines
  • Mathematics

Abstract

We studied the mathematical structure of option pricing both in the Black-Scholes model and the Actuarial model. In the two models, the option prices for the Construction Bank of China, for example, are calculated. Applicability of the two models to the market option prices is discussed. Comparing the numerical results of the option prices calculated in the two models, we discuss how the actuarial model predicts option prices more precisely than the Black-Scholes model.

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