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Pricing Options and Convertible Bonds Based on an Actuarial Approach

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  • Jian Liu
  • Lizhao Yan
  • Chaoqun Ma

Abstract

This paper discusses the pricing problem of European options and convertible bonds using an actuarial approach. We get the pricing formula of European options, extend the pricing results to the case with continuous dividend, and then derive the call-put parity relation. Furthermore, we get the general expression of convertible bond price. Finally, we conduct a comparative analysis of numerical simulation and make an empirical analysis between the B-S model and the actuarial model using the actual data in the Chinese stock market. The empirical results show that the efficiency of the actuarial model is superior to the B-S model.

Suggested Citation

  • Jian Liu & Lizhao Yan & Chaoqun Ma, 2013. "Pricing Options and Convertible Bonds Based on an Actuarial Approach," Mathematical Problems in Engineering, Hindawi, vol. 2013, pages 1-9, December.
    • Handle: RePEc:hin:jnlmpe:676148
    DOI: 10.1155/2013/676148
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    Cited by:

    1. Zhuoxin Liu & Laijun Zhao & Chenchen Wang & Yong Yang & Jian Xue & Xin Bo & Deqiang Li & Dengguo Liu, 2019. "An Actuarial Pricing Method for Air Quality Index Options," IJERPH, MDPI, vol. 16(24), pages 1-19, December.
    2. Hu, Bin & Hu, Yan-Ping, 2024. "A pricing model system for small and micro loan insurance considering limited claims," International Review of Financial Analysis, Elsevier, vol. 93(C).

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