Pricing Options and Convertible Bonds Based on an Actuarial Approach

This paper discusses the pricing problem of European options and convertible bonds using an actuarial approach. We get the pricing formula of European options, extend the pricing results to the case with continuous dividend, and then derive the call-put parity relation. Furthermore, we get the general expression of convertible bond price. Finally, we conduct a comparative analysis of numerical simulation and make an empirical analysis between the B-S model and the actuarial model using the actual data in the Chinese stock market. The empirical results show that the efficiency of the actuarial model is superior to the B-S model.