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Quantitative Finance · Glossaire

Qu'est-ce que « Proportional dividend » ?

Definition 5.2 Derivatives and Volatility · Chapitre 5 — Dividends, Borrow and Forwards

A proportional dividend is modelled as a fixed fraction yjy_j of the share price at the ex-date rather than a fixed amount: the share drops by yjStj−y_jS_{t_j-}, and the forward is multiplied by (1−yj)(1-y_j) for every ex-date before TT. A continuous dividend yield qq is its limit when payments are spread evenly over time.

Forward curve of a share at 100 paying 0.60 a quarter, with a 3% financing rate and a 0.5% borrow fee. Between ex-dates the forward grows at 2.5% a year; on each ex-date it drops by the dividend. Illustrative parameters.
Figure 5.1. Forward curve of a share at 100 paying 0.60 a quarter, with a 3% financing rate and a 0.5% borrow fee. Between ex-dates the forward grows at 2.5% a year; on each ex-date it drops by the dividend. Illustrative parameters.
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