PT  - JOURNAL ARTICLE
AU  - Peter Carr
AU  - Federico Maglione
TI  - Compound Option Pricing and the Roll-Geske-Whaley Formula under the Conjugate-Power Dagum Distribution
AID  - 10.3905/jod.2022.1.172
DP  - 2022 Oct 20
TA  - The Journal of Derivatives
PG  - jod.2022.1.172
4099  - https://pm-research.com/content/early/2022/10/20/jod.2022.1.172.short
4100  - https://pm-research.com/content/early/2022/10/20/jod.2022.1.172.full
AB  - 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.