I have a question. When pricing, do an equity option, dividend has to be taken into account of course, however since there's a taxation on the dividend does the dividend input has to be cut by the taxation rate ? In example, if taxation rate is 30% and my dividend is 6%, should i only input 4.2% in my pricer to match marker prices ? Thank you

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    $\begingroup$ In principle yes, the net dividend should be used. $\endgroup$ – Antoine Conze May 24 '18 at 6:39
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    $\begingroup$ Agree with Antoine. This is because when you look at the replicating strategy, what you receive on your cash account are indeed the net amounts. Since different investors are potentially subject to different withholding taxes, market participants usually fix a funding base curve (e.g. EONIA for EUR-denominated options) and then compute an implied spread accounting for both dividend taxation and repo margins. Of course this assumes you have an idea of the market forward (or future) price for the maturity at hand. If not your best guess is indeed your own funding + taxation rate. $\endgroup$ – Quantuple May 24 '18 at 7:30
  • $\begingroup$ Ok understood, thank you. One last question, let's say i dont have access to fwd market, my funding rate would be marginal compared with the taxation rate, right ? $\endgroup$ – Cedric_W May 25 '18 at 9:16

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