The Application of Option Pricing Model in Financing Guarantee Rate Pricing of Small and Medium-Sized Enterprises

Pengbo Yang, Huan Zhang

Abstract: Financial guarantee institutions of small and medium-sized enterprises play an important supporting role in alleviating the financing problems of small and medium-sized enterprises, but the empirical pricing method and the cash flow discount method are commonly used to solve the problem of financing problems of small and medium-sized enterprises. Due to the limitations of the two pricing methods, this paper expounds the relationship between guarantee and option from the perspective of option, and points out that the guarantee contract is essentially a put option. This paper discusses how to use Black-Scholes option pricing model to determine the guarantee charge from both theoretical and empirical aspects, which provides a reference price for the reasonable determination of guarantee fee in practice.

Keywords: Option Pricing Model, Financing guarantee, Guarantee rate