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To price a vanilla option, the following information are required :

  • Strike price;
  • Underlying price;
  • Volatility;
  • Maturity;
  • Dividends rate;
  • Repo rate;
  • Interest rate;

The strike, underlying price, maturity, Interest rates are known;

The volatility is implied from an options panel in the market;

But practically, where do we get the dividends and repo rates from ?

Thank you

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  • $\begingroup$ I am a bit confused by your question. Options are usually priced using an option pricing model like Black and Schoales. Within the model you also have to make assumptions on the dividends. en.wikipedia.org/wiki/… see chapter on contiuous yield dividends. Actually there are multiple ways to model dividends. $\endgroup$ – Probilitator Feb 22 '14 at 16:29
  • $\begingroup$ With the continuous dividend assumption, which value is gonna be used ? $\endgroup$ – user7120 Feb 22 '14 at 20:55
  • $\begingroup$ do you know how the Black and Scholes formula works ? $\endgroup$ – Probilitator Feb 22 '14 at 21:44
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    $\begingroup$ @Probilitator The point is probably to compute a good value for $r$ to put into the Black Scholes equation. For example by taking the funding costs of the insitution into account, etc. user7120 please correct me if I'm wrong. $\endgroup$ – user1157 Feb 25 '14 at 7:58
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You get the repo rate from asking your broker. Most of the time the underlying is not on "special" so you get whatever standard rate appears in your contract. You obtain dividends from BDVD or a similar service.

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For dividends, you could pull the info from dividend futures, or use the implied dividends backed out via put-call parity. Risk-free rates you can get from whatever yield curve you are using for discounting, or more generally (as Raphael mentioned) using whatever your specific funding curve is.

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