#### Overview of this book

Python for Finance
Credits
Acknowledgments
www.PacktPub.com
Preface
Free Chapter
Introduction and Installation of Python
13 Lines of Python to Price a Call Option
Introduction to Modules
Statistical Analysis of Time Series
Index

## European options with known dividends

Assume that we have a known dividend d distributed at time T1, T1 < T, where T is our maturity date. We can modify the original Black-Scholes-Merton option model by replacing S0 with S, where:

In the previously discussed example, if we have a known dividend of \$1.5 delivered in one month, what is the price of the call?. The price is calculated as follows:

```>>>import p4f
>>>s0=40
>>>d=1.5
>>>r=0.015
>>>T=6/12
>>>s=s0-exp(-r*T*d)
>>>x=42
>>>sigma=0.2
>>>round(p4f.bs_call(s,x,T,r,sigma),2)
1.18
```

The first line of the program imports the `p4f` module, which contains the call option model. The result shows that the price of the call is \$1.18, which is lower than the previous value (\$1.56). It is understandable since the price of the underlying stock would drop roughly by \$1.5 in one month. Because of this, the chance that we could exercise our call option will be less, that is...