2
$\begingroup$

I have liquid option quotes for 1, 2, 3 and 4y expiries. I was able to imply the continuous dividend yield for all of those. How would you extrapolate such implied yield to 5 and 6y expiries?

$\endgroup$
  • 1
    $\begingroup$ I would take a step back and ask the usefulness of such a calculation. Are you calculating dividend yields from vanilla option prices? In practice I have found this to be a first-order approximation. Also in most instances you calculate the dividend from $(r-\delta)$ (requiring you to have some opinion as to the structure of $r$) which is increasingly difficult in the durations you mention. $\endgroup$ – Jared Jul 31 '18 at 15:43

Your Answer

By clicking "Post Your Answer", you acknowledge that you have read our updated terms of service, privacy policy and cookie policy, and that your continued use of the website is subject to these policies.

Browse other questions tagged or ask your own question.