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

Code

• github.com/jherekhealy/AQFED.jl/blob/master/src/pln/etore_gobet.jl
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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.

Reproductions