Valuation and Optimal Exercise Time of American Call Option on Stock Paying Stochastic Dividends

Jiang, Guochao; Wang, Susheng; Dong, Hailing

doi:10.1109/isa.2011.5873430

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2020

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“…Bin Peng and Fei Peng [4] was performed the binomial method and the combined option method. Research with discrete dividends was performed by Guochao Jiang et al [5], that shows the discount process of the stock price is a martingale. This study aims to observe the difference of the result American option pricing with discrete and continuous dividend to see the advantages and disadvantages of the dividend.…”

Section: Introductionmentioning

confidence: 99%

Comparison of American Binomial Options with Discrete and Continuous Dividend

Merdekawati

Norasia

Kumalasari

et al. 2020

IJCSAM

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This study discusses the effect of dividend on option pricing by using a binomial method. It also investigated the initial stock value, number of steps, and strike price effects on the behavior of options pricing. From several simulations conducted, it was found that the values of call options with discrete dividend are greater than the continuous dividend. While on the put option, the values of the put options with a continuous dividend are greater than the discrete dividend. Index Terms-Option pricing, American option, binomial method, dividend.

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Section: Introductionmentioning

confidence: 99%