Feng Dai:

DF Structure models for options pricing

Based on the Partial Distribution, we presents the concepts and expressions of DF process and DF structure and put forward the DF structure models of pricing options on a non-dividend-paying underlying for the first time. The DF structure models are able to price the call and put options exercised at any time, so it is applicable to pricing the American and European options. Finally, examples are given to compare the options priced by DF formulas and by Black-Scholes formulas, they show, as a whole, that the DF’ prices of options are closer to the trading prices than Black-Scholes’ prices in many cases.

Prof. Feng Dai and Prof. Zifu Qin

Department of Management Science, Zhengzhou Information Engineering University

Summary:

•Introduction

• Basic Assumptions and DF Structure

•Partial distribution and stock price

•DF process and DF structure

•The DF Structure Pricing Models of Options on A Non-Dividend-Paying Stock

•DF structure models of call options pricing

•Estimation and Test of the Parameters in Partial Distribution

•The fiducial test of partial distribution

• The Fitness Analysis of Partial Distribution