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School Research Seminar Series - Dividend Derivatives

26 February 2014

1:00 - 2:00pmFB 1.15, 4th Floor Bancroft Building, Mile End Campus, E1 4NS

Speaker

Prof. Radu Tunaru, CeQuFin, Business School, University of Kent

Seminar title

Dividend Derivatives

Research themes

Globalisation; Business Eco-systems , Behavioural Finance Working Group. For more info, please visit http://www.busman.qmul.ac.uk/research/index.html

Abstract

Dividend derivatives are not simply a by-product of equity derivatives. They constitute a distinct growing market and an entire suite of dividend derivatives are offered to investors. In this paper we look at two potential models for equity index dividends and discuss their theoretical and practical merits. The main results emerge from a downward jump-diffusion model with beta distributed jumps and a stochastic logistic diffusion model, both providing an elegant solution to the particular dynamics observed for dividends and cum-dividends, respectively, in the market. Calibration results are discussed with market data on Dow Jones Euro STOXX50 dividend index for futures and European call and put options.

Brief Bio

Professor Radu Tunaru has been working in Finance since 2000 and he specializes in Structured Finance, Derivatives Pricing and Risk Management, and Real Estate Finance. He has published over 45 papers and book chapter contributions. He holds a PhD in Statistical Modelling, 1999 London, and a PhD in Probability and Statistics from the Centre of Mathematical Statistics of the Romanian Academy, 2001, Bucharest. His career includes working for Bank of Montreal and for Merrill Lynch where he was a vice-president in Structured Finance EMEA RMBS. His latest research is on property derivatives, Bayesian models for uncertainty in Finance, dividend derivatives, and on risk-preferences of investor before and after the subprime crisis. He serves as an associate editor on the board of Frontiers in Finance and Economics, Journal of Portfolio Management and Journal of Banking and Finance.


*Chaired by Professor Gulnur Muradoglu

* Lunch from 12:30pm in the kitchen

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