TY - JOUR
T1 - Compound Option Pricing and the Roll-Geske-Whaley Formula under the Conjugate-Power Dagum Distribution
JF - The Journal of Derivatives
DO - 10.3905/jod.2022.1.172
SP - jod.2022.1.172
AU - Carr, Peter
AU - Maglione, Federico
Y1 - 2022/10/20
UR - http://jod.pm-research.com/content/early/2022/10/20/jod.2022.1.172.abstract
N2 - We explore the pricing of compound derivatives under the newly introduced conjugate-power Dagum distribution. Assuming a discrete-time multiplicative conjugate-power Dagum random walk, we first provide an alternative derivation of the price of a married put based on a change of measure, which is helpful for the pricing of compound options. Then, we apply these results to obtain the equivalent of the Roll-Geske-Whaley formula for the pricing of American options in presence of one known discrete dividend under this alternative distribution.
ER -