--> sorry for the fist unreadable mail ....
Hello
I have a question about discretes dividends in the binomial convertible bond pricing engine It seems that
The grid is computed with spot - sum{ NPV(dividends) }
After in the backward computation, we add in the grid the dividends (just dividend not the NPV of dividend)
--> in the last value of grid (ie grid[0][0]) the value is spot - Sum(NpV(Div)) + Sum(Div) != Spot
It is not better to add back in the grid the NPV of dividends ?
like in the hull book chapter 18.3 (5th edition)
Regards
Benoît
In pricingengines/hybrid/binomialconvertibleengine.hpp
-->the grid will be computed with spot - sum{ NPV(dividends) }
// subtract dividends Size i;
for (i=0; i date() >= referenceDate) s0 -= arguments_.dividends[i]->amount() * process_->riskFreeRate()->discount( arguments_.dividends[i]->date()); }
In pricingengines/hybrid/discretizedconvertible.cpp in the grid we add just dividend
Disposable DiscretizedConvertible::adjustedGrid() const { Time t = time(); Array grid = method()->grid(t);
// add back all dividend amounts in the future
for (Size i=0; i = t || close(dividendTime,t))
{ const boost::shared_ptr & d = arguments_.dividends[i];
for (Size j=0; j amount(grid[j]); } }
return grid;