Timeline for Forward on a stock with Dividends
Current License: CC BY-SA 4.0
15 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Nov 9, 2022 at 20:00 | vote | accept | Conductor | ||
| Nov 9, 2022 at 20:00 | history | edited | Conductor | CC BY-SA 4.0 | added 435 characters in body |
| Nov 9, 2022 at 17:04 | history | edited | Conductor | CC BY-SA 4.0 | added 1 character in body |
| Nov 9, 2022 at 16:38 | history | edited | Conductor | CC BY-SA 4.0 | added 159 characters in body |
| Nov 9, 2022 at 15:32 | history | edited | Conductor | CC BY-SA 4.0 | added 297 characters in body |
| Nov 9, 2022 at 15:22 | history | edited | Conductor | CC BY-SA 4.0 | added 1127 characters in body |
| Nov 9, 2022 at 6:05 | answer | added | Kurt G. | timeline score: 2 | |
| Nov 8, 2022 at 18:51 | comment | added | Kurt G. | Your $D$ should then be $D_t=\int_0^tqS_u e^{-ru}\,du$. Then you should get the same forward. | |
| Nov 8, 2022 at 18:42 | comment | added | Conductor | @KurtG.: say I would invest the dividends into the money market account, not the stock. The transaction table above would still be valid: wouldn't I still get a different result to yours? | |
| Nov 8, 2022 at 18:28 | comment | added | Kurt G. | Smart ! You are trying to set up a portfolio in which, instead of investing the paid dividends into the money market account $e^{rt}$, they get invested into buying more shares of the stock $S_t$. This is not uncommon in practice. I thought about this recently and found it quite complicated to set up an equation that reflects the fact that every newly bought piece of share $qS_t$ immediately pays its own dividends that must be reinvested also. It seems easier to do this with a discrete dividend that is just paid once a year. | |
| Nov 8, 2022 at 16:29 | history | edited | Conductor | CC BY-SA 4.0 | deleted 26 characters in body |
| Nov 8, 2022 at 15:28 | comment | added | Conductor | @dm63: thank you. I have taken the expectation and I still get the wrong answer. | |
| Nov 8, 2022 at 15:28 | history | edited | Conductor | CC BY-SA 4.0 | added 191 characters in body |
| Nov 8, 2022 at 14:57 | comment | added | dm63 | The basic difference is that your formula has a term in it that is not known at $t_0$ (The integral) so it can’t be correct. Essentially the other answer has replaced that term by its expectation. | |
| Nov 8, 2022 at 14:38 | history | asked | Conductor | CC BY-SA 4.0 |