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URN etd-0417106-155403 Statistics This thesis had been viewed 2729 times. Download 2193 times. Author JHY-SHIN LIN Author's Email Address email@example.com Department Management Business Administration Year 2005 Semester 1 Degree Master Type of Document Master's Thesis Language English Page Count 46 Title TRINOMIAL PRICING APPLICATION ON TAIWAN INDEX OPTIONS Keyword TXO Binomial Pricing Model Trinomial Option Pricing Model Trinomial Option Pricing Model Binomial Pricing Model TXO Abstract The trading volume of TXO in 2004 reached fourth place in the world. In October 9 of this year, the transaction volume even reached 700,000 lots, which was an historic high. These give us an impression of the massive use of derivatives by the investing public.
This study is based on the TXO in 2003 and 2004 for building up the Trinomial Option Pricing Model for simulating the fair price of TXO. EXCEL is used for mapping out the theoretical prices basing on which decision will be made. For TXO call options: profits for the one, two and four week after the launch into market. In comparing the Binomial Model proposed by Ye Yuan-Peng in 2004, the only variation is the issue release on January 1 2004 with expiry date on June 17 2004. For TXO put option: the theoretical prices from the Trinomial Option Pricing Model and the Binomial Pricing Model are the same. In the first week after the launch, loss resulted, but profit followed in the second and fourth week. The simulation result of put option is not as accurate as the simulation result of the call option. There are two possible reasons. First of all, the trade volume of put options falls behind that of call options. Secondly, in picking up put options, investors are not as familiar with the products as those with call options. This may affect the bid price.
The findings from this study indicated that the Trinomial Option Pricing Model demonstrated three types of stock price movements, “up”, “down” and “horizontal”. For the Binomial Option Pricing Model, there are only the “up” and “down” movements. The theoretical price deriving from the models is used by investors as reference for investment decision-making. Both are valuable to consult. In sum, the Trinomial Option Pricing Model indicated better profit position than the Binomial Option Pricing Model.
Advisor Committee HSIEN-CHE LEE - advisor
Files Date of Defense 2006-01-20 Date of Submission 2006-04-17