Accurate formulas for evaluating barrier options with dividends payout and the application in credit risk valuation

Tian-Shyr Dai, Chun Yuan Chiu

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

1 Scopus citations

Abstract

To price the stock options with discrete dividend payout reasonably and consistently, the stock price falls due to dividend payout must be faithfully modeled. However, this will significantly increase the mathematical difficulty since the post-dividend stock price process, the stock price process after the price falls due to dividend payout, no longer follows the lognormal diffusion process. Analytical pricing formulas are hard to be derived even for the simplest vanilla options.

Original languageEnglish
Title of host publicationHandbook of Financial Econometrics and Statistics
PublisherSpringer New York
Pages1771-1800
Number of pages30
ISBN (Electronic)9781461477501
ISBN (Print)9781461477495
DOIs
StatePublished - 1 Jan 2015

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