In this paper we introduce a new financial product named Outperformance Certificates. We study the €43 billion sample by examining 1,507 issues of the certificates outstanding in August 2005 issued by banks in Europe. We present formulas to price the certificates and empirically examine the...

Pricing options on a stock that pays discrete dividends has not been satisfactorily settled because of the conflicting demands of computational tractability and realistic modelling of the stock price process. Many papers assume that the stock price minus the present value of future dividends or...