Brazilian listed options with discrete dividends and the fast Laplace transform
Maikon Araujo
TL;DR
This paper introduces a numerical method using the fast Laplace transform to accurately price Brazilian listed options with discrete dividends and compute their Greeks efficiently.
Contribution
It presents a novel application of the fast Laplace transform for pricing options with discrete dividends, improving computational efficiency and accuracy.
Findings
High accuracy in option pricing and Greeks calculation.
Efficient computation suitable for real-time applications.
Applicable to Brazilian listed options with discrete dividends.
Abstract
The Brazilian stock exchange (B3) has long used a strike-only adjustment to account for dividends in its listed equity options. This adjustment still makes it necessary to account for discrete dividends when pricing either calls or puts. This work presents a numerical procedure, based on the fast Laplace transform and its inverse, a procedure that can efficiently compute the Brazilian listed options' premium and the Greeks delta, gamma, and theta with high accuracy.
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Taxonomy
TopicsFinancial Reporting and Valuation Research · Housing Market and Economics · Stochastic processes and financial applications