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How to calculate the theoretical optimal Strike and Expiration for Covered Calls?

Given the following parameters: Hold the call to expiration. Estimate of probability of expiring ITM. (I know it is an estimate.) Indifferent to being called away. Only fixed number of shares ...
B Seven's user avatar
  • 319
2 votes
1 answer
131 views

Difference in value - American call and a European call - stock pays a dividend

For a stock paying a single dividend prior to expiration, I would like to estimate the difference in value between an American call and a European call with the same expiration, strike and underlier. ...
krkeane's user avatar
  • 383
3 votes
1 answer
182 views

Unable to correctly implement the pricing of an American call with multiple discrete dividends using the Clenshaw-Curtis quadrature

I'm not a quant, just an enthusiast. I am trying to implement in C++ the methodology published in the paper "Fast Quadrature Methods for Options with Discrete Dividends", by Thakoor and ...
Sarah Van Distel's user avatar
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0 answers
43 views

Deterministic optimal call time

Consider a American Option on a linear payoff i.e., if called at time $T$, it pays off $S(T)$, the stock price. Is the optimal call time of such an option determinsitc? Is there an intuition to the ...
Arshdeep's user avatar
  • 2,561
2 votes
2 answers
2k views

Why it is not possible to price American perpetual call option using PDE approach?

Using a standard PDE approach to price an American perpetual put option I obtain that the price of such option has the following form: $$ V(S) = A S + B S^{-2r/\sigma^2}. $$ And then I need to find a ...
MMM's user avatar
  • 153
2 votes
2 answers
275 views

Analysis of exercising a call option early

Most options traders sell their call options early instead of exercising them, as you would make a bigger profit this way due to being able to salvage some remaining extrinsic value. For example: ...
Wayne's user avatar
  • 21
2 votes
4 answers
1k views

pricing american calls on non dividend paying stocks

It is never optimal to exercise an american call option early if it is written on a stock that doesn't pay dividends, yet when pricing such an option, using a binomial model, we check whether or not ...
WeakLearner's user avatar