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Title
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A closed-form formula for unprotected American call options on assets paying discrete known dividends
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Author
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Abstract
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| In general, American options cannot be valued by closed-form formulas. There is however an exception within the setting of dividendpaying assets. It is known that American call options will be exercised early, only at a time just prior to an ex-dividend date. In extending the Roll-Geske-Whaley model and in using the theory of the n-fold compound options, such closed-form formulas are derived in case the asset pays n dividends with n > 2. Moreover a sensitivity analysis for American call options will be performed. Finally some numerical examples are included. |
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Language
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English
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Source (series)
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Research paper / UA, Faculteit TEW ; 2004:015
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Publication
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Antwerpen
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UA
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2004
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Volume/pages
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11 p.
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Full text (open access)
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