Forums  > Pricing & Modelling  > price in dividend yield when no div will be paid over life of option?  
     
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cgrady40


Total Posts: 3
Joined: Mar 2021
 
Posted: 2022-04-08 13:05
i'm looking at the NRZ May 20 11 ATM calls and puts.
NRZ has a large yield so it affects option prices pretty substantially. iVol is ~8% higher for the calls. When i plug this in to my model with the dividend yield, parity hold and the market price is pretty much fair value. setting the dividend yield to zero makes the put undervalued.

my question is-

NRZ paid their last quarterly dividend on 4/1, so there wont be another dividend paid over the of the option.

So why is the dividend still being priced in?
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