Related papers: Variance matters (in stochastic dividend discount …
Dividend discount models have been developed in a deterministic setting. Some authors (Hurley and Johnson, 1994 and 1998; Yao, 1997) have introduced randomness in terms of stochastic growth rates, delivering closed-form expressions for the…
In this paper we propose a new model for pricing stock and dividend derivatives. We jointly specify dynamics for the stock price and the dividend rate such that the stock price is positive and the dividend rate non-negative. In its simplest…
We study the dependence of volatility on the stock price in the stochastic volatility framework on the example of the Heston model. To be more specific, we consider the conditional expectation of variance (square of volatility) under fixed…
Optimal dividend strategy in dual risk model is well studied in the literatures. But to the best of our knowledge, all the previous works assumes deterministic interest rate. In this paper, we study the optimal dividends strategy in dual…
We present several models to describe the stochastic evolution of stocks that show some strong resistance at some level and generalize to this situation the evolution based upon geometric Brownian motion. If volatility and drift are related…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
This study presents a long-term alternative formula for stock price variation described by a geometric Brownian motion on the basis of median instead of mean or expected values. The proposed method is motivated by the observation made in…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
In the classical model of stock prices which is assumed to be Geometric Brownian motion, the drift and the volatility of the prices are held constant. However, in reality, the volatility does vary. In quantitative finance, the Heston model…
This paper studies the effect of quarterly earnings reports on the stock price. The profitability of the stock is modelled by geometric Brownian diffusion and the Constant Elasticity of Variance model. We fit several variations of…
In this paper we provide a general solution for the dividend discount model in order to compute the intrinsic value of a common stock that allows for multiple stage growth rates of any predetermined number of periods. A mathematical proof…
In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
This article extends, in a stochastic environment, the Yagil (1987) model which establishes, in a deterministic dividend discount model, a range for the exchange ratio in a stock-for-stock merger agreement. Here, we generalize Yagil's work…
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…
This chapter presents a review of the dividend discount models starting from the basic models (Williams 1938, Gordon and Shapiro 1956) to more recent and complex models (Ghezzi and Piccardi 2003, Barbu et al. 2017, D'Amico and De Blasis…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…