Publication
Title
Closed formula for options with discrete dividends and its derivatives
Author
Abstract
We present a closed pricing formula for European options under the BlackScholes model as well as formulas for its partial derivatives. The formulas are developed making use of Taylor series expansions and a proposition that relates expectations of partial derivatives with partial derivatives themselves. The closed formulas are attained assuming the dividends are paid in any state of the world. The results are readily extensible to time-dependent volatility models. For completeness, we reproduce the numerical results in Vellekoop and Nieuwenhuis, covering calls and puts, together with results on their partial derivatives. The closed formulas presented here allow a fast calculation of prices or implied volatilities when compared with other valuation procedures that rely on numerical methods.
Language
English
Source (journal)
Applied mathematical finance. - London
Publication
London : 2009
ISSN
1350-486X
Volume/pages
16:6(2009), p. 517-531
Full text (Publisher's DOI)
Full text (publisher's version - intranet only)
UAntwerpen
Faculty/Department
Publication type
Subject
External links
Record
Identification
Creation 03.03.2015
Last edited 10.12.2015