Analysis of the Pricing of SSE 50 ETF Options Based on Monte Carlo Simulation

Tiansi Zhu

doi:10.2991/978-94-6239-801-6_35

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Analysis of the Pricing of SSE 50 ETF Options Based on Monte Carlo Simulation

Authors

Tiansi Zhu¹^{, *}

¹Business Faculty, Monash University, Melbourne, VIC, 3168, Australia

^*Corresponding author. Email: tzhu0035@student.monash.edu

Corresponding Author

Tiansi Zhu

Available Online 23 October 2026.

DOI: 10.2991/978-94-6239-801-6_35 How to use a DOI?
Keywords: GARCH Model; Monte Carlo Simulation; Option Pricing
Abstract: Reasonable pricing is the key to option trading and stable market operation. As the first listed option in China, SSE 50ETF option's pricing accuracy is very important for investors’ decision-making and market development. Taking SSE 50ETF’s daily closing price from January 2016 to December 2025 as a sample, this paper describes the volatility characteristics by GARCH model and combines Monte Carlo simulation (100,000 simulations) to price SSE 50ETF European options. The results show that the logarithmic return of SSE 50ETF shows the characteristics of peak and thick tail, volatility concentration and ARCH effect, and GARCH (1,1) model has excellent fitting effect, and the annualized volatility is 18.85%. Monte Carlo simulation pricing conforms to the law of option price. After optimization by dual variance reduction technology, the average absolute error is 0.10283, and the overall root mean square error is reduced to 0.0090, which is within the acceptable range of the industry. This study verifies the effectiveness of GARCH-Monte Carlo combination method, provides quantitative support for investor arbitrage, market maker quotation and market price discovery, and helps the stable development of stock index option market.
Copyright: © 2026 The Author(s)
Open Access: Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title: Proceedings of the 2026 2nd International Conference on Financial Innovation and Marketing Management (FIMM 2026)
Series: Advances in Economics, Business and Management Research
Publication Date: 23 October 2026
ISBN: 978-94-6239-801-6
ISSN: 2352-5428
DOI: 10.2991/978-94-6239-801-6_35 How to use a DOI?
Open Access: Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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ris enw bib

TY  - CONF
AU  - Tiansi Zhu
PY  - 2026
DA  - 2026/10/23
TI  - Analysis of the Pricing of SSE 50 ETF Options Based on Monte Carlo Simulation
BT  - Proceedings of the 2026 2nd International Conference on Financial Innovation and Marketing Management (FIMM 2026)
PB  - Atlantis Press
SP  - 310
EP  - 318
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-801-6_35
DO  - 10.2991/978-94-6239-801-6_35
ID  - Zhu2026
ER  -

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