Research on the Pricing Model of Financial Derivatives

Based on the importance of the pricing model of financial derivatives, this paper points out the defects and risks of the current model and proposes some possible solutions. The research method is mainly to summarize the framework of the existing model by searching the academic literature and commercial examples related to the pricing model. The final conclusion is that an obvious flaw of the pricing model is that it is based on an idealized market state and cannot predict hidden market trends, but through random volatility, consideration of market friction, and the development of mathematical technology, the market can refine the pricing model. Research and forecast risk premium, market liquidity and asset price changes in advance when considering pricing. In addition, the market is also supported to consider the application of large machines in the portfolio as well as the issue of options panels, so as to deepen the understanding of the movement of financial products.