Numerical methods for option pricing with dividends
Options and other financial derivatives are traded extensively at the stock markets all over the world. Determining the financially "correct" price for these is done through numerical simulations. One of the most common approaches is the solve the Black-Scholes equation using numerical methods such as for example finite difference methods or radial basis function approximations. However, the Black-Scholes equation does not allow for dividends (utdelningar) in the underlying stocks. The purpose of this MSc thesis project is to learn about how dividends work, how they can be modeled, and to incorporate this into one or more of the numerical models that we are currently using for the Black-Scholes equation.