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Pricing an earnings move · Part 2 of 3
A stock at $100 reports earnings in the next 21 trading days. The at-the-money implied volatility for that expiry is 40%, and on ordinary days the stock realises 30%. Use 252 trading days a year and zero rates.
Treat the earnings day as one day with its own move, and every other day at 30%. What standard deviation of the earnings-day move is implied, in per cent?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
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