# A black-scholes formula for option pricing with dividends

A black-scholes formula for option pricing with dividends Abstract We obtain a Black-Scholes formula for the arbitrage-free pricing of European Call options with constant coefficients when the underlying stock generates dividends. To hedge the Call option, we will always borrow money from bank. We see the influence of the dividend term on the option pricing via the comparison theorem of BSDE(backward stochastic differential equation , ). We also consider the option pricing problem in terms of the borrowing rate R which is not equal to the interest rater. The corresponding Black-Scholes formula is given. We notice that it is in fact the borrowing rate that plays the role in the pricing formula. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Applied Mathematics-A Journal of Chinese Universities Springer Journals

# A black-scholes formula for option pricing with dividends

, Volume 11 (2): 6 – Jun 1, 1996
6 pages      /lp/springer-journals/a-black-scholes-formula-for-option-pricing-with-dividends-ar3CtStSEX
Publisher
Springer Journals
1996 Editorial Committee of Applied Mathematics-A Journal of Chinese Universities
ISSN
1005-1031
eISSN
1993-0445
DOI
10.1007/BF02662009
Publisher site
See Article on Publisher Site

### Abstract

Abstract We obtain a Black-Scholes formula for the arbitrage-free pricing of European Call options with constant coefficients when the underlying stock generates dividends. To hedge the Call option, we will always borrow money from bank. We see the influence of the dividend term on the option pricing via the comparison theorem of BSDE(backward stochastic differential equation , ). We also consider the option pricing problem in terms of the borrowing rate R which is not equal to the interest rater. The corresponding Black-Scholes formula is given. We notice that it is in fact the borrowing rate that plays the role in the pricing formula.

### Journal

Applied Mathematics-A Journal of Chinese UniversitiesSpringer Journals

Published: Jun 1, 1996

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