time_adj_dividends

For each of the N elements of <code>S/h</code> find the sum of the
given M dividends, discounted to <code>t_final</code> by <code>r</code> and <code>h</code>

Algorithms to price American and European
equity options, convertible bonds and a
variety of other financial derivatives. It uses an
extension of the usual Black-Scholes model in which
jump to default may occur at a probability specified
by a power-law link between stock price and hazard
rate as found in the paper by Takahashi, Kobayashi,
and Nakagawa (2001) <doi:10.3905/jfi.2001.319302>. We
use ideas and techniques from Andersen and
Buffum (2002) <doi:10.2139/ssrn.355308> and
Linetsky (2006) <doi:10.1111/j.1467-9965.2006.00271.x>.

Brian Boonstra

ragtop

Pricing Equity Derivatives with Extensions of Black-Scholes

time_adj_dividends function

<dl><dt>relevant_divs</dt>
<dd>A <code>data.frame</code> with columns <code>time</code>, <code>fixed</code>,
and <code>proportional</code>. Dividend size at the given <code>time</code> is
then expected to be equal to <code>fixed + proportional * S / S0</code></dd>
<dt>t_final</dt>
<dd>Time beyond which to ignore dividends</dd>
<dt>r</dt>
<dd>risk-free interest rate</dd>
<dt>h</dt>
<dd>Default intensities</dd>
<dt>S</dt>
<dd>Stock prices</dd>
<dt>S0</dt>
<dd>initial underlying price</dd></dl>

Arguments

Find the sum of time-adjusted dividend values — time_adj_dividends

<dl>

<dt>relevant_divs</dt>
<dd>A <code>data.frame</code> with columns <code>time</code>, <code>fixed</code>,
and <code>proportional</code>. Dividend size at the given <code>time</code> is
then expected to be equal to <code>fixed + proportional * S / S0</code></dd>


<dt>t_final</dt>
<dd>Time beyond which to ignore dividends</dd>


<dt>r</dt>
<dd>risk-free interest rate</dd>


<dt>h</dt>
<dd>Default intensities</dd>


<dt>S</dt>
<dd>Stock prices</dd>


<dt>S0</dt>
<dd>initial underlying price</dd>

</dl>

time_adj_dividends: Find the sum of time-adjusted dividend values

Description

Usage

Value

Arguments

See Also