Standard Approach to Estimating Volatility (Equation 15.1 Define on as the volatility per day between day n-1 and day n, as estimated at end of day n-1 · Define, as the value of market variable at end of day i Define ui= In(S /Si-1)
European Options on Stock 12.2 Paying Continuous Dividends We get the same probability distribution for the stock price at time T in each of the following cases 1. The stock starts at price So and provides a continuous dividend yield q 2. The stock starts at price Soe-q' and provides no dividend yield