Estimating discrete dividends by no-arbitrage

Sascha Desmettre, Sarah Grün and Frank Thomas Seifried

Quantitative Finance, 2017, vol. 17, issue 2, 261-274

Abstract: We develop and showcase a simple no-arbitrage methodology for the valuation of discrete dividend payments, based exclusively on market prices of options via the put-call parity. Our approach integrates all available option market data and simultaneously calibrates the market-implied discount curve, thus ensuring consistency across spot and derivative markets. We illustrate our method using stocks of European blue-chip companies.

Date: 2017
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DOI: 10.1080/14697688.2016.1176239

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