The DF Structure Models for Options Pricing On the Dividend- Paying and Capital-Splitting

Abstract

Based on the DF structure models for option pricing (F. Dai, 2005), this paper discusses further the DF structure models on three cases, i.e., the underlying stock being dividend-paid, capital-split or dividend-paid and capital-split. These three cases are discussed separately, and are integrated to the general models for call or put. Finally, the examples are given to compare the options prices calculated by the DF formulas and Black-Scholes formulas, and they show, as a whole, that the DF formulas are not inferior to Black-Scholes formulas. DF formula is useful to traders in financial market because it is convenient to adjust along with the trading time.DF structure model, options pricing, dividend-paying, capital- splitting