We develop and showcase a simple no-arbitrage methodology for the valuation of discrete dividend payments, based exclusively on market prices of options via the put-call parity. Our approach integrates all available option market data and simultaneously calibrates the market-implied discount curve, thus ensuring consistency across spot and derivative markets. We illustrate our method using stocks of European blue-chip companies
In this paper we investigate the representation of a class of non Gaussian processes, namely generalized grey Brownian motion, in terms of a weighted integral of a stochastic process which is a solution of a certain stochastic differential equation. In particular the underlying process can be seen as a non Gaussian extension of the Ornstein-Uhlenbeck process, hence generalizing the representation results of Muravlev, Russian Math. Surveys, 66(2), 2011 as well as Harms and Stefanovits, Stochastic Process. Appl., 129, 2019 to the non Gaussian case.
We develop a framework for analyzing an executive’s own-company stockholding and work effort preferences. The executive, characterized by risk aversion and work effectiveness parameters, invests his personal wealth without constraint in the financial market, including the stock of his own company whose value he can directly influence with work effort. The executive’s utility-maximizing personal investment and work effort strategy is derived in closed form, and a utility indifference rationale is applied to determine his required compensation. Being unconstrained by performance contracting, the executive’s work effort strategy establishes a base case for theoretical or empirical assessment of the benefits or otherwise of constraining executives with performance contracting
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