The Exact Value for European Options on a Stock Paying a Discrete Dividend
Probability
2016-08-16 v1 Analysis of PDEs
Pricing of Securities
Abstract
In the context of a Black-Scholes economy and with a no-arbitrage argument, we derive arbitrarily accurate lower and upper bounds for the value of European options on a stock paying a discrete dividend. Setting the option price error below the smallest monetary unity, both bounds coincide, and we obtain the exact value of the option.
Cite
@article{arxiv.math/0609212,
title = {The Exact Value for European Options on a Stock Paying a Discrete Dividend},
author = {João Amaro de Matos and Rui Dilão and Bruno Ferreira},
journal= {arXiv preprint arXiv:math/0609212},
year = {2016}
}
Comments
14 pages,3 figures