Option Pricing with a Dividend General Equilibrium Model
Author | : Kyriakos Chourdakis |
Publisher | : |
Total Pages | : 45 |
Release | : 2002 |
ISBN-10 | : OCLC:1290402289 |
ISBN-13 | : |
Rating | : 4/5 (89 Downloads) |
Download or read book Option Pricing with a Dividend General Equilibrium Model written by Kyriakos Chourdakis and published by . This book was released on 2002 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper derives a general equilibrium option-pricing model for a European call assuming that the economy is exogenously driven by a dividend process following Hamilton's (1989) Markov regime switching model. The derived formula is used to investigate if the European call option prices are consistently priced with the stock market prices. This is done by obtaining the implied risk aversion preferences, based on traded option prices data.