Stock forward contract is a kind of financial derivative.FreecryptogamesandroidWhich allows both buyers and sellers in the futureFreecryptogamesandroidBuy and sell stocks at an agreed price on a specific date. However, pricing forward contracts is not an easy task and requires a combination of factors. Here are some common pricing methods for stock forward contracts.
oneFreecryptogamesandroid. Non-arbitrage pricing method
Non-arbitrage pricing is one of the most common pricing methods for stock forward contracts. The basic principle is that if the gap between the forward price and the spot price exceeds the holding cost, then investors can make a risk-free profit through the carry trade. Therefore, the price of the forward contract should be equal to the spot price plus the cost of holding.
twoFreecryptogamesandroid. Risk-neutral pricing method
Risk-neutral pricing is a pricing method based on risk-neutral probability. The basic principle is that investors should expect the same expected return regardless of the actual future price. Therefore, the price of the forward contract should be equal to the spot price multiplied by the risk neutral probability.
3. Regression analysis method
Regression analysis is a pricing method based on the principle of statistics. Through regression analysis, investors can estimate the volatility of stock prices and calculate the theoretical price of forward contracts.
4. Monte Carlo simulation method
Monte Carlo simulation is a pricing method based on stochastic process. By simulating the random movement of stock prices, investors can calculate the probability distribution of forward contracts and estimate their theoretical prices accordingly.
Here is a table comparing the four pricing methods:
The basic principles of the pricing method are applicable conditions, advantages and disadvantages, no arbitrage pricing method, spot price + holding cost without arbitrage opportunity is simple and easy, but it is necessary to accurately estimate cost risk neutral pricing method spot price × risk neutral probability risk neutral applicable to risk neutral investors However, accurate estimation of probability regression analysis based on volatility statistical estimation of a large number of historical data is suitable for investors with statistical background, but needs a large amount of data Monte Carlo simulation method based on stochastic process is more complex and suitable for complex financial derivatives, but the amount of calculation is large.The above are some common stock forward contract pricing methods, investors can choose the appropriate method according to their own situation and needs.
