A Simple Pricing Model for Plain-Vanilla Dividend Futures Options

6 Pages Posted: 15 Jun 2019

See all articles by Ghislain Vong

Ghislain Vong

Deutsche Bank AG - Global Equity Derivatives

Date Written: April 29, 2019

Abstract

This technical note provides a detailed description of a simple but effective modeling solution to mark and risk manage plain-vanilla options on dividend futures. We focus on equity indices, as dividend products for single stocks are less liquid and observable and we derive a simple pricing formula for dividend futures options based on a dynamic replication argument. The simplicity of the derived pricing methodology makes it particularly relevant for marking-making purpose.

Keywords: Dividend futures options, Black-Scholes, pricing, equity derivatives, Eurostoxx

JEL Classification: G13

Suggested Citation

Vong, Ghislain, A Simple Pricing Model for Plain-Vanilla Dividend Futures Options (April 29, 2019). Available at SSRN: https://ssrn.com/abstract=3397898 or http://dx.doi.org/10.2139/ssrn.3397898

Ghislain Vong (Contact Author)

Deutsche Bank AG - Global Equity Derivatives ( email )

United Kingdom

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