February 9th, 2012, 2:27 pm
As for Monte Carlo, this is just a drop in the stock price S:S_(t+) = S(t_-)-D.and you have to ensure that the option price V(S_(t+)) = V(S_(t-)) remains the same. You can do that by shifting your Grid or (e.g. if D depends somewhat on S) by interpolation.I hope that helps!Darou
Last edited by
Darou on February 8th, 2012, 11:00 pm, edited 1 time in total.