ABSTRACT
Describe assets that pay lump sum dividends or proportional dividends. Analyze how these payments affect derivatives, in particular how they affect the early exercise premium for America-style options over European-style options. Analyze dividends as riskless cash flows, to implement option pricing with dividends within both continuous (Black-Scholes) and discrete (CRR) models. Construct interest rate models from zero-coupon bond prices. Compute zero-coupon bond discounts from coupon bond prices. Relate riskless yield curves to no-arbitrage prices for cash flow swaps using discrete models.
