The Exact Value for European Options on a Stock Paying a Discrete Dividend

Details The Exact Value for European Options on a Stock Paying a Discrete Dividend The Exact Value for European Options on a Stock Paying a Discrete Dividend

2006-09-07

arxiv.org/abs/math/0609212v1

Mathematics

Probability

14 pages,3 figures

Scientific paper

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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