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j23quants
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Joined: January 26th, 2021, 11:14 pm

dividend-protected options

December 7th, 2022, 8:39 pm

I understand that a too elementary model will lead to the wrong Greeks and inappropriate hedge ratios, thereby crippling any arbitrage strategy. 

I read something about dividend bleeding effect and some kind of jump-dividend approach for a stock paying continuous dividends.

Cant find any papers at the internet related with this matter. 

Any one has a clue of how this model works ?
 
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Alan
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Re: dividend-protected options

December 8th, 2022, 4:10 pm

Potentially interesting topic. If I get hold of the paper (wrote one of the authors), will try to respond more. In the meantime, you might want to look at a couple of articles I have on the correct handling of discrete dividends. One is   
Back to basics: A new approach to the discrete dividend problem (Haug, Haug, & Lewis) 
and the second is a follow-up with new material: 
"Back to Basics: An Update on the Discrete Dividend Problem", which is Ch. 9 here