Journal of Banking & Finance Vol. 20 No. 9 1996
The impact of firm specific news on implied volatilities
open access
Abstract
We study the implied volatility behavior of call options around scheduled news announcement days. Implied volatilities increase significantly during the pre-event period and reach a maximum on the eve of the news announcement. After the news release, implied volatility drops sharply and gradually moves back to its long-run level. Only on the event date are movements in the price of the underlying significantly larger than expected. These results confirm the theoretical results of Merton (1973).
- DOI
- 10.1016/s0378-4266(96)00011-8
- Volume
- 20
- Issue
- 9
- Pages
- 1447-1461
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex