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The valuation of options on discrete dividend-paying stocks

Author

Listed:
  • Yuanchuang Shan
  • Huisheng Shu
  • Xuekang Zhang
  • Haoran Yi

Abstract

In this paper, the valuation of European options in which the underlying stock pays a discrete dividend is investigated. A specific value is set in advance, and a dividend is paid when the underlying share price reaches it. The risk-neutral price of the associated European call option is derived. Numerical simulations are presented to illustrate the effects of model parameters on the option prices.

Suggested Citation

  • Yuanchuang Shan & Huisheng Shu & Xuekang Zhang & Haoran Yi, 2024. "The valuation of options on discrete dividend-paying stocks," Applied Economics Letters, Taylor & Francis Journals, vol. 31(12), pages 1090-1095, July.
    • Handle: RePEc:taf:apeclt:v:31:y:2024:i:12:p:1090-1095
    DOI: 10.1080/13504851.2023.2176431
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