Liquid Assets Risk and Financing Strategy based on Black-Scholes Model

Hongbo Zhu1, Yanjiao Ma2

1Shanghai Waigaoqiao Free Trade Zone Group Co., Ltd, Shanghai, 200137, China

2Guotai Junan Futures, Shanghai, 200042, China

Abstract: In Liquid assets financing theory, there are three financing strategies-aggressive financing strategy, conservative financing strategy and moderate financing strategy. These three strategies adopt different proportions of long-term and short-term capital in order to achieve the best economic efficiency. After the definition of complete risk-neutral world, we can exclude the influence of risk on Liquid assets financing, and we can get the Liquid assets financing strategy without risk, that is, if there is no risk factor at all, the aggressive financing strategy is the best. However, this Hypothesis is not realistic enough, so it needs to be relaxed. Under the Hypothesis of limited risk neutrality, risk gradually influences Liquid assets financing strategy, and the advantage of aggressive financing strategy is weakened. Finally, we can get the Liquid assets financing strategy which is suitable for China's national conditions, that is, the conservative optimal strategy, by completely liberalizing the Hypothesis and combining with China's Liquid economic environment.

Keywords: Liquid assets financing theory; Risk-neutral world; Black-Scholes theory