Pre-electoral coalition agreement from the Black-Scholes point of view

Darko Mitrovic

Papers from arXiv.org

Abstract: A political party can be considered as a company whose value depends on the voters support i.e. on the percentage of population supporting the party. Dynamics of the support is thus as a stochastic process with a deterministic growth rate perturbed by a white noise modeled through the Wiener process. This is in an analogy with the option modeling where the stock price behaves similarly as the voters' support. While in the option theory we have the question of fair price of an option, the question that we ask here is what is a reasonable level of support that the coalition of a major party (safely above the election threshold) and a minor party (under or around the election threshold) should achieve in order the minor party to get one more representative. We shall elaborate some of the conclusions in the case of recent elections in Montenegro (June, 2023) which are particularly interesting due to lots of political subjects entering the race.

Date: 2023-10, Revised 2024-02
New Economics Papers: this item is included in nep-cdm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2310.16424 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2310.16424

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().