Role of Option Prices in Analyzing the Valuation Impact of Corporate Events

14 Pages Posted: 16 Jun 2020

See all articles by Wajid Ali

Wajid Ali

Capital University of Science and Technology

Date Written: May 21, 2020

Abstract

Event study, panel regression, and difference-in-difference techniques are among the most prominent research methodologies in corporate finance. However, these techniques are inappropriate if corporate events are anticipated to some degree, as most events are. This paper proposes options as an additional model-free source of information to identify the likelihood and impact of corporate events. We show how to quantify event impact in a simple example and assert that few restrictions on the state space are required for the approach to work in more complex settings.

Keywords: Event Study, Options State Prices, Difference-in-Difference Method, Identification

JEL Classification: D44, G14

Suggested Citation

Ali, Wajid, Role of Option Prices in Analyzing the Valuation Impact of Corporate Events (May 21, 2020). Available at SSRN: https://ssrn.com/abstract=3607326 or http://dx.doi.org/10.2139/ssrn.3607326

Wajid Ali (Contact Author)

Capital University of Science and Technology ( email )

Islamabad
Islamabad, Fedral
Pakistan

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