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The Exact Value for European Options on a Stock Paying a Discrete Dividend

João Amaro de Matos·Rui Dilão·Bruno Ferreira
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Abstract

In the context of a Black-Scholes economy and with a no-arbitrage argument, we derive arbitrarily accurate lower and upper bounds for the value of European options on a stock paying a discrete dividend. Setting the option price error below the smallest monetary unity, both bounds coincide, and we obtain the exact value of the option.

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João Amaro de Matos, Rui Dilão, Bruno Ferreira. 2006-09-07. The Exact Value for European Options on a Stock Paying a Discrete Dividend. https://arxiv.org/abs/math/0609212

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