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arXiv · 2106.12051

More stochastic expansions for the pricing of vanilla options with cash dividends

Fabien Le Floc'h
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Abstract

There is no exact closed form formula for pricing of European options with discrete cash dividends under the model where the underlying asset price follows a piecewise lognormal process with jumps at dividend ex-dates. This paper presents alternative expansions based on the technique of Etore and Gobet, leading to more robust first, second and third-order expansions across the range of strikes and the range of dividend dates.

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Fabien Le Floc'h. 2021-06-22. More stochastic expansions for the pricing of vanilla options with cash dividends. https://arxiv.org/abs/2106.12051

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