On the value of european options on a stock paying a discrete dividend at uncertain date
Autor(a) principal: | |
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Data de Publicação: | 2017 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10362/25865 |
Resumo: | The purpose of this paper is to evaluate the impact of uncertainty about the dividend date on the value of European options in the context of the Black-Scholes model. We use an arbitrarily accurate numerical approximation for the value of this type of instrument on a stock paying a discrete dividend, considering di erent probability distributions over the date of dividend payment, and comparing with the deterministic case. We nd that the main determinant is the skewness of the probabilistic distribution. For positive skewness, uncertainty about the dividend payment day decreases the value of the option, and negative skewness has the opposite e ect for standard parameters. However, if interest rates are negative, volatility is small enough and the option is su ciently in the money, the impact of uncertainty is reverted. The understanding of this mechanism may have practical implications for hedging strategies. |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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spelling |
On the value of european options on a stock paying a discrete dividend at uncertain dateEuropean optionsDiscrete dividendsUncertain ex-dividend dateDomínio/Área Científica::Ciências Sociais::Economia e GestãoThe purpose of this paper is to evaluate the impact of uncertainty about the dividend date on the value of European options in the context of the Black-Scholes model. We use an arbitrarily accurate numerical approximation for the value of this type of instrument on a stock paying a discrete dividend, considering di erent probability distributions over the date of dividend payment, and comparing with the deterministic case. We nd that the main determinant is the skewness of the probabilistic distribution. For positive skewness, uncertainty about the dividend payment day decreases the value of the option, and negative skewness has the opposite e ect for standard parameters. However, if interest rates are negative, volatility is small enough and the option is su ciently in the money, the impact of uncertainty is reverted. The understanding of this mechanism may have practical implications for hedging strategies.Matos, João Amaro deRUNPereira, José António Gomes de Sousa2017-11-29T08:43:25Z2017-01-202017-01-20T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10362/25865TID:201714973enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T04:13:36Zoai:run.unl.pt:10362/25865Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:28:23.433220Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
On the value of european options on a stock paying a discrete dividend at uncertain date |
title |
On the value of european options on a stock paying a discrete dividend at uncertain date |
spellingShingle |
On the value of european options on a stock paying a discrete dividend at uncertain date Pereira, José António Gomes de Sousa European options Discrete dividends Uncertain ex-dividend date Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
On the value of european options on a stock paying a discrete dividend at uncertain date |
title_full |
On the value of european options on a stock paying a discrete dividend at uncertain date |
title_fullStr |
On the value of european options on a stock paying a discrete dividend at uncertain date |
title_full_unstemmed |
On the value of european options on a stock paying a discrete dividend at uncertain date |
title_sort |
On the value of european options on a stock paying a discrete dividend at uncertain date |
author |
Pereira, José António Gomes de Sousa |
author_facet |
Pereira, José António Gomes de Sousa |
author_role |
author |
dc.contributor.none.fl_str_mv |
Matos, João Amaro de RUN |
dc.contributor.author.fl_str_mv |
Pereira, José António Gomes de Sousa |
dc.subject.por.fl_str_mv |
European options Discrete dividends Uncertain ex-dividend date Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
European options Discrete dividends Uncertain ex-dividend date Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
The purpose of this paper is to evaluate the impact of uncertainty about the dividend date on the value of European options in the context of the Black-Scholes model. We use an arbitrarily accurate numerical approximation for the value of this type of instrument on a stock paying a discrete dividend, considering di erent probability distributions over the date of dividend payment, and comparing with the deterministic case. We nd that the main determinant is the skewness of the probabilistic distribution. For positive skewness, uncertainty about the dividend payment day decreases the value of the option, and negative skewness has the opposite e ect for standard parameters. However, if interest rates are negative, volatility is small enough and the option is su ciently in the money, the impact of uncertainty is reverted. The understanding of this mechanism may have practical implications for hedging strategies. |
publishDate |
2017 |
dc.date.none.fl_str_mv |
2017-11-29T08:43:25Z 2017-01-20 2017-01-20T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10362/25865 TID:201714973 |
url |
http://hdl.handle.net/10362/25865 |
identifier_str_mv |
TID:201714973 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799137909702393856 |