Pricing and managing complex share buy-back contracts: an alternative to optimal control
A new method applies optimised heuristic strategies to maximise share buy-back contracts’ value
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Bastien Baldacci, Philippe Bergault and Olivier Guéant introduce a novel methodology for the pricing and management of complex share buy-back contracts. By using optimised heuristic repurchase strategies, they demonstrate how standard pricing tools can be applied, resulting in the disentanglement of the repurchase strategy from the bank’s hedging strategy.
The analysis of payout policies, especially the distinction between dividends and share buy-backs, is fundamental
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