FDDividendEngineMerton73< Scheme > − Finite-differences pricing engine for dividend options using escowed dividends model.
#include <ql/pricingengines/vanilla/fddividendengine.hpp>
Inherits FDDividendEngineBase< Scheme >.
Inherited by FDAmericanCondition< FDDividendEngineMerton73< Scheme > >, FDEngineAdapter< FDDividendEngineMerton73< Scheme >, DividendVanillaOption::engine >, FDShoutCondition< FDDividendEngineMerton73< Scheme > >, and FDDividendEngine< Scheme >.
Public Member Functions
FDDividendEngineMerton73 (const boost::shared_ptr< GeneralizedBlackScholesProcess > &process, Size timeSteps=100, Size gridPoints=100, bool timeDependent=false)
Additional Inherited Members
template<template< class > class Scheme = CrankNicolson>
class QuantLib::FDDividendEngineMerton73< Scheme >" Finite-differences pricing engine for dividend options using escowed dividends model.
The Merton-73 engine is the classic engine described in most derivatives texts. However, Haug, Haug, and Lewis in ’Back to Basics: a new approach to the discrete dividend problem’ argues that this scheme underprices call options. This is set as the default engine, because it is consistent with the analytic version.
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