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Statistics: Posted by Alan — October 6th, 2018, 2:28 pm

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1.

Here the dollar dividends are discrete. I wouldn't use a 'rate'. Treating discrete dollar dividends sensibly under Black-Scholes is both tricky and contentious: there are various approaches. The one I advocate is given in Ch. 9 ('Back to Basics: an update on the discrete dividend problem') in my book "Option Valuation under Stochastic Volatility II". Before reading that chapter, you might also want to take a look at the 2003 article from Wilmott magazine, similarly titled "Back to basics: ..." by Haug, Haug, and Lewis. (available in various places).

It's possible your implied dividends are not behaving sensibly because you are using an older (improper, IMO) escrowed dividend model. The problems with escrowed dividends are discussed in both of my sources for you.

2.

Here, a time-varying dividend rate makes sense to extract. To do so, I recommend extracting an inferred dividend rate by the method of the "VIX white paper". The method amounts to fixing an interest rate and then extracting an option-implied forward price for the underlying, with the maturity of the forward contract identical to the maturity of the options. Of course, if it is for an important purpose, you can always try to reconcile that rate with direct day-by-day dividend projections.

Statistics: Posted by Alan — September 28th, 2018, 4:28 pm

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I am working on comparing valuations of vanilla call options using either LIBOR with historical dividends or OIS with implied dividends in the Black Scholes formula. Unlike historical dividends, the implied dividend rate shows more volatility. I was wondering if the forum had any insight into smoothing techniques that could be applied to this figure to achieve a more stable valuation over time.

Many thanks!

Statistics: Posted by pl0310a — September 28th, 2018, 12:30 pm

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For the two-factor stochastic interest rate problem we are happy that the PDE is well-defined view of the problem. Since we don't have analytical solution we tested ADE-BarakatClark-Robert-Weiss (berndl!),

* modified_midpoint

* Runge_Kutta4

* Runge_Kutta_dopri5

The answers were the same.

Of course ADE >> MOL qua performance.

Statistics: Posted by Cuchulainn — September 20th, 2018, 11:57 am

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It indeed sounds silly when noncognoscenti discuss the intricacies of information theory, but it didn't stop you.

And I know for a fact when you talk about NP you are confusing it with unstable numerical processes as I mentioned

Please don't try to blind me with high-falutin' smoke screens like Info Theory. I don't do smoke screens.

Over and out.

Statistics: Posted by Cuchulainn — September 20th, 2018, 11:38 am

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At least John Baez says "I have no idea".

Statistics: Posted by Cuchulainn — September 20th, 2018, 8:49 am

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Statistics: Posted by Collector — September 20th, 2018, 4:36 am

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BTW, did you know that Shakespeare died when he was your age? He wrote one word too many... Carpe diem!

Statistics: Posted by katastrofa — September 20th, 2018, 1:31 am

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"Drawn with a team of little atomies

Athwart men's noses as they lie asleep"

"Who shut their coward gates on atomies"

Statistics: Posted by Collector — September 19th, 2018, 10:15 pm

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Are u describing the meeting of Rome-o and Juliet, or Adam and Eve? actually written by B!

Romuliet is a good example too: he thinks she's dead but she isn't, she thinks he isn't dead but he is, they are both dead. Negative information was what killed Romeo and Giulietta.

Statistics: Posted by katastrofa — September 19th, 2018, 9:11 pm

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