Options on non-dividend paying stocks?

[ccnew]

Hi,

For a paper I have to look for option prices on a stock or an index which doesn't pay out dividends. But in my search for options that are liquid traded, it is hard to find options on stocks/indices that don't pay out dividends.
I hope some-one here can give me a hint???
Thanks.

 

[A Dashing Blade]

FTSE 100 Index doesn't reinvest dividends

 

[ccnew]

Thank u!
Is their an easy way to check if there are dividends, and hence: can I find relatively easily also some other options on non-dividend paying stocks/indices?
Or how did you know that this FTSE 100 index doesn't reinvest dividends: based on experience?

 

[A Dashing Blade]

Used to specialise in FTSE100 index options in the late '80's but to prove it I've just spent 30 mins
Googling for this and came up with nada (?) Maybe someone else can come up with a web page?

Pretty sure the Dax DOES reinvest dividends, don't think the S&P or the Dow does, would assume that
the DJ eurostoxx does.

 

[grantx]

Ccnew,

Why stock/index options which don't pay a div? What is the question of your paper?

Grant.

 

[ccnew]

I have to set up a technical Variance Gamma model and compare the prices I calculate with that model with the market prices of European options on a stock/index. By doing so I can find optimal parameters for this Variance Gamma model and can use it to price some kind of structured product using this model and Monte Carlo simulations.
To ease computations and implementation in Matlab we have to search for non-dividend paying stocks, indices.

But this search isn't that easy, as 'A Dashing Blade' already noticed ...

 

[grantx]

Ccnew,

Is your model based on Black-Scholes (or variant), ie assumes no dividends, and thus the need for non-div paying stocks?

When you say "European", do you mean as in EU countries or types of exercise?

Can't you use ex-div prices, or discount the cum-div price?

Why not create theoretical prices on fictitious stocks/indices with a basic pricing model (eg Black-Scholes, Black '76)and compare these to the results of your model?

Interesting. Please keep us informed

Grant.

 

[ccnew]

The Variance Gamma model is an extention of the Black Scholes model which allows to take in account that the stock price proces can have jumps (this isn't so in the Black Scholes model because there one assumes a normal distributed stock price proces so the chance of having a large crash or up-move is underestimated with Black-Scholes).
It is possible to assume dividends in this model, but we are recommended not to do so, because this complicates the implementation.

With European I mean the type of exercise, i.e. only on maturity.

With ex-div prices, you mean prices after taken in account that there wil be dividends?

Taking theoretical option prices isn't an solution I'm afraid because it really had to be prices that are going on currently in the market.

 

[grantx]

Ccnew,

"had to be prices that are going on currently in the market". All equity options are American-style exercise - you won't find any European-style.

By "ex-div" I mean once the dividend has been paid out.

John Hull's book (Options, Futures and other Derivative Securities) looks at Binomial models which account for dividends but here, as I suggested above, the price is discounted by the future value of the dividend. However, his model uses American-style exercise so I doubt whether it is appropriate.

"dividends...complicates the implementation". Surely ignoring the problem would undermine the results? Dividends are known and I would suggest this is far less problematic than accounting for the additonal variable of random price movements.

I'll do a search for the Variance Gamma model (I'm not familiar with it) which may help to clarify matters.

Grant.