Study on black-scholes stock option pricing model based on dynamic investment strategy

In this paper, we presents a new option Pricing model based on dynamic investment strategy. The new option assumes that an investor sets up a stock exchange strategy based on the changes of the stock price when the investor has held options. Within the valid period of the options, the investor may buy stocks based on an investment strategy for call option or he may sell stocks based on an investment strategy for put option. A linear dynamic investment strategy is proposed, and the intrinsic value functions for the cases of call option and put option are derived respectively. Based on the BlackScholes option pricing theory, new option pricing models are finally obtained respectively by solving complex integral problems. Furthermore, the relationship and the disparity on the option prices between the new options and the classical ones are discussed. Because of the investment strategy within the option validity, the investor can easily reduce anticipative loss, thus the price of the options based on the investment Strategy is lower than those of the classical options.