Pricing American barrier options with discrete dividends by binomial trees |
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Authors: | Marcellino Gaudenzi Antonino Zanette |
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Institution: | 1.Dipartimento di Finanza dell’Impresa e dei Mercati Finanziari,Università di Udine,Udine,Italy |
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Abstract: | We are concerned with the problem of pricing plain-vanilla and barrier options with cash dividends in a piecewise lognormal
model. In the plain-vanilla case, we offer a method with provides thin upper and lower bounds of the exact binomial price.
In the barrier case, we provide an efficient algorithm based on suitable interpolation techniques. As by-product, we provide
a new method for pricing American barrier options with continuous dividends. |
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Keywords: | |
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