Analysis of China's A-share Market Based on Implied Volatility

Abstract

Market volatility is the focus of investors in the process of investment research. It is not only related to investors' judgment of market trends, but also has an important impact on the results of investment returns. The implied volatility of the market is a kind of volatility that is obtained with the Black-Scholes model, which has been widely recognized as well as applied in market analysis. Taking China's A-share market investment as an example, this paper analyzes and forecasts the market situation based on its implied volatility by Monte Carlo simulation, and compares the relevant results with the volatility calculated in the traditional way. This paper uses the Black-Scholes model and MATLAB soft solution to solve the implied volatility of China's A-share market represented as of the HS300 Index by numerical method. At the same time, the actual volatility of the HS300 index is calculated based on historical data. It is found that the results of the two are relatively close during the study period. After that, this paper takes the calculated implied volatility as the input parameter and combines the historical data to conduct Monte Carlo simulation of the trend of the HS300 Index in the next year (select different time points as the simulation starting point).