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Option pricing model on dividend-paying securities

Yingchun Zheng, Yunfeng Yang


This paper discusses the problem of pricing on European options in jump-diffusion model by martingale method. We assuming jump process are more general then Poisson
process a kind of nonexplosive counting process. We discusses arbitrage pricing within the option pricing model under the assumption that the stock upon which an option is
written pays dividends during option's lifetime.. By changing basic assumption of R.C.Merton option pricing model to the assumption. It is established that the behavior
model of the stock pricing process is jump-diffusion process. With risk-neutral martingale measure, pricing formula and put-call parity of European options with dividends are
obtained by stochastic analysis method. The results of R.C.Merton are generalized.


option pricing model, dividend, equivalent martingale measure, count process.

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