Dividend Modeling: An Exogenous Threshold Approach

With the fast development of the dividend market and the increased interest in dividend derivatives in recent years, dividend modeling became a key issue for banks. In this article, we aim to introduce a new approach for dividend modeling. We propose two exogenous threshold models: a short term one based on returns, and a long term one based on spots. Our findings show that this approach is relevant and close to reality with no negative dividends as it might be the case in some existing models.