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Extracting Implied Dividends from Options Prices: some Applications to the Italian Derivatives Market

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Author Info

  • Martina Nardon

    ()
    (Dept. of Applied Mathematics, University Ca'Foscari of Venice)

  • Paolo Pianca

    ()
    (Dept. of Applied Mathematics, University Ca'Foscari of Venice)

Abstract

This 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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File URL: http://virgo.unive.it/wpideas/storage/2010wp198.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 198.

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Length: 11 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:vnm:wpaper:198

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Keywords: Implied dividends; put-call parity; option pricing; binomial methods.;

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