[Quantlib-dev] Black Vasicek/Equity option pricing seems ignoring dividend

[Lawrence S. <law...@gm...>]

Hi Luigi et all,

Recently I used QuantLib 1.22, Visual C++ 2019/Windows for a project and
discovered that Black Vasicek option pricing seems to be ignoring dividend.

I used the EquityOption.cpp example code to demonstrate the issue below.
Please let me know if there are some factors that I may have overlooked.
Thanks in advance.

(1) when dividend = 0


Option type = Put
Maturity = May 17th, 1999
Underlying price = 36
Strike = 40
Risk-free interest rate = 6.000000 %
Dividend yield = 0.000000 %
Volatility = 20.000000 %


Method                             European      Bermudan      American
Black-Scholes                      3.844308      N/A           N/A
====>Black Vasicek Model                3.818577      N/A           N/A
Heston semi-analytic               3.844306      N/A           N/A
Bates semi-analytic                3.844306      N/A           N/A
Barone-Adesi/Whaley                N/A           N/A           4.459628
Bjerksund/Stensland                N/A           N/A           4.453064
Integral                           3.844309      N/A           N/A
Finite differences                 3.844330      4.360765      4.486113
Binomial Jarrow-Rudd               3.844132      4.361174      4.486552
Binomial Cox-Ross-Rubinstein       3.843504      4.360861      4.486415
Additive equiprobabilities         3.836911      4.354455      4.480097
Binomial Trigeorgis                3.843557      4.360909      4.486461
Binomial Tian                      3.844171      4.361176      4.486413
Binomial Leisen-Reimer             3.844308      4.360713      4.486076
Binomial Joshi                     3.844308      4.360713      4.486076
MC (crude)                         3.834522      N/A           N/A
QMC (Sobol)                        3.844613      N/A           N/A

(2) When dividend is 5%. As you can see  Black Vasicek Model  returns same
price for dividend=0%.

Option type = Put
Maturity = May 17th, 1999
Underlying price = 36
Strike = 40
Risk-free interest rate = 6.000000 %
Dividend yield = 5.000000 %
Volatility = 20.000000 %


Method                             European      Bermudan      American
Black-Scholes                      4.895555      N/A           N/A
====> Black Vasicek Model                3.818577      N/A           N/A
Heston semi-analytic               4.895554      N/A           N/A
Bates semi-analytic                4.895554      N/A           N/A
Barone-Adesi/Whaley                N/A           N/A           5.070904
Bjerksund/Stensland                N/A           N/A           5.051277
Integral                           4.895554      N/A           N/A
Finite differences                 4.895581      5.036359      5.071667
Binomial Jarrow-Rudd               4.896061      5.037016      5.072378
Binomial Cox-Ross-Rubinstein       4.894947      5.036011      5.071531
Additive equiprobabilities         4.897540      5.038650      5.074061
Binomial Trigeorgis                4.894949      5.036014      5.071534
Binomial Tian                      4.896303      5.037197      5.072505
Binomial Leisen-Reimer             4.895554      5.036396      5.071635
Binomial Joshi                     4.895555      5.036396      5.071635
MC (crude)                         4.883527      N/A           N/A
QMC (Sobol)                        4.895873      N/A           N/A

Lawrence Sum