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On the pricing of bivariate options in the presence of a discrete dividend payment
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Resumo(s)
Under the assumptions of the Black & Scholes economy, I derive a pricing formula for European bivariate options where one of the underlyings pays a discrete dividend. While the price can be approximated to any precision, this is computationally costly. Notions of the extension of the approach to a higher number of underlyings are given.
Descrição
A Work Project, presented as part of the requirements for the Award of a Master's Double Degree in Finance from the NOVA School of Business and Economics / Masters Degree in Economics from Insper
Palavras-chave
Bivariate option Discrete dividend Heat equation in finance