A summary on pricing American call options under the assumption of a lognormal framework in the Korn-Rogers model

MaRDI QIDQ424681zbMATH OpenFDO

Authors Susanne Kruse, Marlene Müller

Publication date 4 June 2012

Published in Bulletin of the Malaysian Mathematical Sciences Society. Second Series (Search for Journal in Brave)

Full work available at URL http://math.usm.my/bulletin/html/vol35_2A_13.html

zbMATH Keywords

American optionsBlack-Scholes modeldividend discount modeldividendsoption pricing

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Applications of stochastic analysis (to PDEs, etc.) (60H30) Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

This article is a summary of the longer paper ``Pricing American Call Options under the Assumption of Stochastic Dividends -- an Application of the Korn-Rogers-Model [in: Berichte des Fraunhofer ITWM, Nr. 158 (2009)]. They provide a closed-form pricing formula for the price of an American call option on a dividend-paying stock price. The stock price is assumed to follow the Black-Scholes dynamics and the dividends are structured according to the \textit{R. Korn} and \textit{L. C. G. Rogers} model [``Stocks paying discrete dividends: modelling and option pricing, J. Derivatives 13, 44--49 (2005)]. The proofs are not included in this summary.

Recommendations

• scientific article; zbMATH DE number 5631873
• scientific article; zbMATH DE number 2226958
• The valuation of Black-Scholes model with continuous dividend payments
• American call pricing on dividend-paying and placing stocks with stochastic volatility
• American call option with stochastic market model

Cited in

(3)

• Can outstanding dividend payments be estimated by American options?
• Option pricing based on a regime switching dividend process
• Option pricing under a Markov-modulated Merton jump-diffusion dividend

This page was built for publication: A summary on pricing American call options under the assumption of a lognormal framework in the Korn-Rogers model

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q424681)