quantlib-dev

[Quantlib-dev] Re: Quantlib-dev digest, Vol 1 #441 - 2 msgs

[<TB...@ao...>]

Hi Luigi,
 
1) Discrete Dividends in Binomial tree
Please see below e-mail from Professor Hull who wrote the Hull/White book  on 
Options, Futures and other Derivatives on his views below on how discrete  
dividends should be handled.  This means that what we had previously during  
early days of development of Convertible Bonds engine was correct.
 
My preferred approach  is to model the stock price less the PV of the 
dividends and then add dividends  in. This is described in my book. It has the 
advantage of being consistent with  the way European options are valued using 
Black-Scholes and is widely used in  practice. 
John  Hull 
2)  Monte Carlo Simulation of Hull White process for the  MBS pricing engine, 
I have a few ideas I would experiment with till your  contribution arrives. 
Regards
 
Theo
 

Re: [Quantlib-dev] Re: Quantlib-dev digest, Vol 1 #441 - 2 msgs

[Luigi B. <lui...@gm...>]

On 04/20/2006 10:54:02 PM, TB...@ao... wrote:
>=20
>> My preferred approach  is to model the stock price less the PV of =20
>> the dividends and then add dividends  in. This is described in my =20
>> book. It has the advantage of being consistent with  the way =20
>> European options are valued using Black-Scholes and is widely used =20
>> in  practice.
>> John  Hull
>=20
> This means that what we had previously during early days of =20
> development of Convertible Bonds engine was correct.

Theo,
	apologies for the delay. Yes, the idea was correct---but I =20
think the implementation was not. However, go ahead and draft an =20
implementation.

Later,
	Luigi


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I'd never join any club that would have the likes of me as a member.
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