Author(s)

Yixian Zeng

Corresponding Author

Yixian Zeng

ABSTRACT

Shark fin option has received a good response since its launch. It can function as a combination of options on bonds due to its guaranteed income. There may be a satisfactory gain when the expected fluctuations are not particularly dramatic. Until now, many financial institutions are selling the product. And the underlying assets have also expanded from the initial stock index to a broader range, such as the exchange rate. But option pricing has always been a hot topic. Shark fin option is essentially an upward knock-out option. The pricing of European shark fin option needs to compare the ending strike price and market price, but the fluctuation in market price is uncertain. Therefore, this paper starts with a financial product of shark fin option and prices it through Monte-Carlo Simulation. Monte-Carlo Simulation is essentially a continuous binary tree, whose core idea is to take the average as the final result through numerous simulations.

KEYWORDS

Upward Knock-out Option, Monte-Carlo Simulation