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Understanding How Dividends Affect Option Prices

Edeki, S.O. and Ugbebor, Olabisi O. and Owoloko, E. A. (2016) Understanding How Dividends Affect Option Prices. International Journal of Pure and Applied Mathematics, 106 (4). pp. 1029-1036. ISSN 1311-8080 (printed version); ISSN: 1314-3395 (on-line version)

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In this paper, we propose a pricing model for stock option valuation. The model is derived from the classical Black-Scholes option pricing equation via the application of the constant elasticity of variance (CEV) model with dividend yield. This modifies the Black- Scholes equation by incorporating a non-constant volatility power function of the underlying stock price, and a dividend yield parameter.

Item Type: Article
Uncontrolled Keywords: stock options, CEV, stochastic dynamics, dividend yield
Subjects: H Social Sciences > HA Statistics
Q Science > QA Mathematics
Divisions: Faculty of Engineering, Science and Mathematics > School of Mathematics
Depositing User: Mrs Aderonke Olufunke Asaolu
Date Deposited: 29 Aug 2017 03:22
Last Modified: 29 Aug 2017 03:22

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