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A closed-form formula for unprotected American call options on assets paying discrete known dividends


  • THOMASSEN, Liesbeth
  • VAN WOUWE, Martine


In general, American options cannot be valued by closed-form formulas. There is however an exception within the setting of dividendpaying assets. It is known that American call options will be exercised early, only at a time just prior to an ex-dividend date. In extending the Roll-Geske-Whaley model and in using the theory of the n-fold compound options, such closed-form formulas are derived in case the asset pays n dividends with n > 2. Moreover a sensitivity analysis for American call options will be performed. Finally some numerical examples are included.

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  • THOMASSEN, Liesbeth & VAN WOUWE, Martine, "undated". "A closed-form formula for unprotected American call options on assets paying discrete known dividends," Working Papers 2004015, University of Antwerp, Faculty of Applied Economics.
  • Handle: RePEc:ant:wpaper:2004015

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