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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
The Black–Scholes Options Pricing Model 403
16.7 The Options Pricing Model for Securities that
Pay Known Dividends
When a stock pays dividends, the options are not payout-protected. is means that when a stock goes
ex-dividend, the stock price will decrease by the amount of dividends that are declared. e decrease in
the stock price due to dividend payment will decrease the price of a call option and increase the price of
a put option. us, the option price should take into account the possibility of dividend payment during
the life of the option.
Since the stock price is the present value of future dividends, the dierence between the current ...
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Publisher Resources

ISBN: 9781299447547Publisher Website