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The pricing of China stock index options based on monetary policy uncertainty

Author

Listed:
  • Niu, Jing
  • Ma, Chao
  • Wang, Yunpeng
  • Chang, Chun-Ping
  • Wang, Haijie

Abstract

In the field of option pricing, scholars have been exploring the constant settings of volatility and interest rate ever since the Black-Scholes model was put forward. This research introduces a floating interest rate into the local volatility model, analyzes the model’s pricing effects, and compares them from the aspects of an in-sample pricing error and out-of-sample pricing error respectively using data of CSI (China Securities Index) SH-SZ (Shanghai-Shenzhen) 300 stock index options. The empirical results show that the Surface Stochastic Volatility Inspire model is better than the Stochastic Volatility Inspire model.

Suggested Citation

  • Niu, Jing & Ma, Chao & Wang, Yunpeng & Chang, Chun-Ping & Wang, Haijie, 2022. "The pricing of China stock index options based on monetary policy uncertainty," Journal of Asian Economics, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:asieco:v:81:y:2022:i:c:s1049007822000616
    DOI: 10.1016/j.asieco.2022.101504
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    More about this item

    Keywords

    Stock index option; Monetary policy; Pricing;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • G1 - Financial Economics - - General Financial Markets

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