Please use this identifier to cite or link to this item: http://hdl.handle.net/1822/21362

TitleDiscrete dividends and the FTSE-100 index options valuation
Author(s)Areal, Nelson
Rodrigues, Artur
KeywordsAmerican options
Computacional finance
Options pricing
Monte Carlo methods
Numerical methods for option pricing
Derivative pricing models
Computational finance
Issue date2014
PublisherTaylor & Francis
JournalQuantitative Finance
Abstract(s)This paper studies the effect of discrete dividends on the FTSE-100 index options valuation, following closely Harvey and Whaley's [J. Fut. Mkts, 1992, 12(2), 123–137] study on the S&P-100 index. To the best of our knowledge, no such study has ever been performed on FTSE-100 options, where the dividends have a discreteness pattern different from the S&P-100. Unlike the Harvey and Whaley study, both American and European options are considered, a more accurate benchmark is proposed, and a comprehensive comparison of the accuracy of a larger set of valuation methods is performed. It is shown that there are significant differences in accuracy and speed among different methods, and that, for both American and European options, a great deal of accuracy can be gained by using an approximation that takes into account the discrete nature of the FTSE-100 index option dividends.
TypeArticle
URIhttp://hdl.handle.net/1822/21362
DOI10.1080/14697688.2011.618457
ISSN1469-7688
Publisher versionhttp://www.tandfonline.com/doi/pdf/10.1080/14697688.2011.618457
Peer-Reviewedyes
AccessRestricted access (UMinho)
Appears in Collections:NIPE - Artigos em Revistas de Circulação Internacional com Arbitragem Científica

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