In the topic, when the expected known dividend is beyond the maturity of Forward Contract, why there is no effect on the valuation or the pricing?
Kunal TolaniIntermediate
Derivatives – Price & Valuations of a Forward Contract in a Dividend Paying Stock
Share
On maturity of the forward contract, you will get the stock. So, after maturity, both stock and forward contract on the stock are entitled to such dividend. So, there is no effect on the valuation or the pricing.
Sorry for asking a basic question, if the forward contract is matured at the date, how is it entitled to the dividend?
When the forward contract matures, you get the stock. When you get the stock, you are entitled to the dividend
Got it. Thank you 🙂 I was a bit confused.
Share price already reflects the dividend effect in its price at particular moment
Thank you