Dividend Adjusted Model to value Long Term Options
Originally published: 20/06/2016 09:39
Publication number: ELQ-72650-1
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Dividend Adjusted Model to value Long Term Options

A dividend-adjusted model for valuing long term options.

Description
It considers the expected dividend yield on the underlying asset.

This program calculates the value of a long term option (> 1 year) adjusting for dividends using the expected dividend yield on the current value of the asset.

The user has to input the following variables:
1. Current market value of the underlying asset
2. Variance in the ln(value) of the underlying asset
3. Strike price of the option
4. Riskless interest rate that corresponds to the life of the option
5. Time to expiration on the option
6. Expected dividend yield on the underlying asset.

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)

This Best Practice includes
1 Excel Model File

Prof. Aswath Damodaran offers you this Best Practice for free!

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Further information

The objective of this model is to get the following output values:
- Value of the call
- Value of the put


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