Complex Capital Structures

I wrote the paper below, "Applying the Option Pricing Method to Discrete Payoffs in Complex Capital Structures" to show how to use option pricing to value securities in complex capital structures when there are a discrete number of future outcomes. I also showed that the values produced by the discrete distributions can be very closely matched by the values in a standard application of option pricing which assumes that outcomes are lognormally distributed. The paper makes two important points: You do not need to assume equity is lognormally distributed and even if you do, it does not necessarily lead to invalid results.