Extracting Implied Dividends from Options Prices: some Applications to the Italian Derivatives Market
AbstractThis contribution deals with options on assets which pay discrete dividends. We analyze some methodologies to extract information on dividends from observable option prices. Implied dividends can be computed using a modified version of the well known put-call parity relationship. This technique is straightforward, nevertheless, its use is limited to European options and, when dealing with equities, most traded options are of American-type. As an alternative, numerical inversion of pricing methods can be used. We apply different procedures to obtain implied dividends of stocks of the Italian Derivatives Market.
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Bibliographic InfoPaper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 198.
Length: 11 pages
Date of creation: Sep 2010
Date of revision:
Implied dividends; put-call parity; option pricing; binomial methods.;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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