English, Article edition: A Markov-modulated model for stocks paying discrete dividends Sakkas, E.; Le, H.

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Physical Description
  • article
Language
  • English

Edition details

Title
  • A Markov-modulated model for stocks paying discrete dividends
Author
  • Sakkas, E.
  • Le, H.
Physical Description
  • article
Notes
  • We extend the model in [Korn, R., Rogers, L.C.G., 2005. Stock paying discrete dividends: modelling and option pricing. Journal of Derivatives 13, 44-49] for (discrete) dividend processes to incorporate the dependence of assets on the market mode or the state of the economy, where the latter is modeled by a hidden finite-state Markov chain. We then derive the resulting dynamics of the stock price and various option-pricing formulae. It turns out that the stock price jumps not only at the time of the dividend payment, but also when the underlying Markov chain jumps.
  • Option pricing Hidden Markov chain Dividend
  • RePEc:eee:insuma:v:45:y:2009:i:1:p:19-24
Language
  • English
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