Title
A closed-form formula for unprotected American call options on assets paying discrete known dividends A closed-form formula for unprotected American call options on assets paying discrete known dividends
Author
Faculty/Department
Faculty of Applied Economics
Publication type
report
Publication
Antwerpen :UA, [*]
Subject
Economics
Mathematics
Source (series)
Research paper / UA, Faculteit TEW ; 2004:015
Volume/pages
11 p.,
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
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.
Full text (open access)
https://repository.uantwerpen.be/docman/irua/fc97e8/b39493b4.pdf
Handle