12.10 Valuing European Index Options We can use the formula for an option on a stock paying a continuous dividend yield Set So current index level Set g average dividend yield expected during the life of the option Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal UniversityOptions, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University 12.10 Valuing European Index Options We can use the formula for an option on a stock paying a continuous dividend yield • Set S0 = current index level • Set q = average dividend yield expected during the life of the option