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Unformatted text preview: – For options on futures contracts q = r 2 Binomial Tree for Dividend Paying Stock • Procedure : – Draw the tree for the stock price less the present value of the dividends. – Create a new tree by adding the present value of the dividends at each node. • This ensures that the tree recombines and makes assumptions similar to those when the BlackScholes model is used. 3 Extensions of Tree Approach • Time dependent interest rates • The control variate technique 4...
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This note was uploaded on 01/19/2012 for the course FIN 4520 taught by Professor Lucyackert during the Spring '12 term at Kennesaw.
 Spring '12
 LucyAckert

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