The Exact Value for European Options on a Stock Paying a Discrete Dividend
João Amaro de Matos (),
Rui Dil\~ao and
Papers from arXiv.org
In the context of a Black-Scholes economy and with a no-arbitrage argument, we derive arbitrarily accurate lower and upper bounds for the value of European options on a stock paying a discrete dividend. Setting the option price error below the smallest monetary unity, both bounds coincide, and we obtain the exact value of the option.
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Working Paper: The exact value for European options on a stock paying a discrete dividend (2006)
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