A mathematical model for contingent claim pricing in a preannounced policy

Fen-Ying Chen ()
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Fen-Ying Chen: Shih Hsin University

Economics Bulletin, 2009, vol. 29, issue 4, A27

Abstract: This paper presents a mathematical model for contingent claim pricing in a preannounced policy. There are some properties in the model. First, one can distinguish the preannouncement effects on the mean and volatility of asset returns. Second, the European call option pricing solution in the model can reduce to the Black-Sholes (1973) formula as no preannouncement effects occur before maturity.

Keywords: Preannounced policy; Preannouncement effect; Fat tails; Discontinuity; Option pricing. (search for similar items in EconPapers)
JEL-codes: G0 (search for similar items in EconPapers)
Date: 2009-12-06
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