Power call option formula. A standard power option has a nonlinear payoff at maturity. The payoff of a call is: Power call payoff = Max [Si – X, 0]. The payoff of a put is.

Power call option formula

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Power call option formula. A standard power option has a nonlinear payoff at maturity. The payoff of a call is: Power call payoff = Max [Si – X, 0]. The payoff of a put is.

Power call option formula


Then I applied the BS-formula for option pricing which gives a call price. But this leads to the wrong result. Now my question is: What is the reasoning behind this choice? Why is the price of a European Power Call option without dividend yield derived by using Black-Scholes formula with dividends?

That doesn't make sense to me. And why did my straightforward approach lead to a wrong result? By posting your answer, you agree to the privacy policy and terms of service. Questions Tags Users Badges Unanswered. Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. Join them; it only takes a minute: Here's how it works: Anybody can ask a question Anybody can answer The best answers are voted up and rise to the top.

LocalVolatility 4, 3 9 I think my question is not a duplicate of this link. I modified my question maybe now my problem is a bit clearer. Don't get hung up on the term "dividend yield". Sign up or log in Sign up using Google. Sign up using Facebook. Sign up using Email and Password. Post as a guest Name. Possible duplicate of How to derive the price of a square-or-nothing call option?


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