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The accuracy of the escrowed dividend model on the value of European options on a stock paying discrete dividend
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Resumo(s)
This project characterizes the accuracy of the escrowed dividend model on the value of European options on a stock paying discrete dividend. A description of the escrowed dividend model is provided, and a comparison between this model and the benchmark model is realized. It is concluded that options on stocks with either low volatility, low dividend yield, low ex-dividend to maturity ratio or that are deep in or out of the money are reasonably priced with the escrowed dividend model.
Descrição
A Work Project, presented as part of the requirements for the Award of a Master Degree in Finance from the NOVA - School of Business and Economics