The DF Structure Models for Options Pricing On the Dividend- Paying and Capital-Splitting

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The DF Structure Models for Options Pricing On the Dividend- Paying and Capital-Splitting

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Feng Dai (Zhengzhou Information Engineering University)

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Feng Dai

Abstract

Based on the DF structure models for option pricing (F. Dai, 2005), this paper discusses further the DF structure models on three cases, i.e., the underlying stock being dividend-paid, capital-split or dividend-paid and capital-split. These three cases are discussed separately, and are integrated to the general models for call or put. Finally, the examples are given to compare the options prices calculated by the DF formulas and Black-Scholes formulas, and they show, as a whole, that the DF formulas are not inferior to Black-Scholes formulas. DF formula is useful to traders in financial market because it is convenient to adjust along with the trading time.

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Paper provided by EconWPA in its series Finance with number 0508012.

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Length: 10 pages
Date of creation: 25 Aug 2005
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Handle: RePEc:wpa:wuwpfi:0508012

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Article
- Feng Dai, 2007. "The DF Structure Models for Options Pricing on the Dividend-Paying and Capital-Splitting," The Icfai Journal of Applied Economics, ICFAI Press, vol. 0(3), pages 17-30, May.

Find related papers by JEL classification:
G - Financial Economics

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-11-09 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Geske, Robert & Roll, Richard, 1984. " On Valuing American Call Options with the Black-Scholes European Formula," Journal of Finance, American Finance Association, vol. 39(2), pages 443-55, June. [Downloadable!] (restricted)
Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144. [Downloadable!] (restricted)
Other versions:
- Merton, Robert C., 1975. "Option pricing when underlying stock returns are discontinuous," Working papers 787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June. [Downloadable!] (restricted)
Barone-Adesi, Giovanni & Whaley, Robert E, 1987. " Efficient Analytic Approximation of American Option Values," Journal of Finance, American Finance Association, vol. 42(2), pages 301-20, June. [Downloadable!] (restricted)

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