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

  • Feng Dai

    (Zhengzhou Information Engineering University)

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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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File URL: http://128.118.178.162/eps/fin/papers/0508/0508012.pdf
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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
Date of revision:
Handle: RePEc:wpa:wuwpfi:0508012
Note: Type of Document - pdf; pages: 10
Contact details of provider: Web page: http://128.118.178.162

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  1. 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.
  2. Peter Carr & Robert Jarrow & Ravi Myneni, 1992. "Alternative Characterizations Of American Put Options," Mathematical Finance, Wiley Blackwell, vol. 2(2), pages 87-106.
  3. 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.
  4. 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.
  5. 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.
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