it might be a stupid question, but i really do not understand why when we want to calculate a price of a forward on an equity index we do
e^(Rf - cont. compounded dividend yield)*T
Why is it Rf MINUS the cont. compounded dividend yield. why minus??
Or when calculatin the value of the forward contract we have:
S/ (e^cont.comp. dividend*(T-t) - FP/(e^Rf*(T-t).
Hope you understand the question.
It just confuses me why especially when calculatin the price its Rf - cont.comp. div.)作者: genuinecfa 时间: 2013-4-8 14:02
it confuse me for a while – but hope this info help u get over it
Let’s assume
So - PVD = So/e^(cont.comp. dividend*T)
If you solve for PVD, you will see that
PVD = Divident @ time T / e^(cont.comp. dividend*T)
or
Dividend @ time T = PVD x e^(cont.comp. dividend*T)
Or if you work from So-PVD – you will see it why
