We study an option pricing framework that accounts for the price impact of an earnings announcement (EA), and analyze the behavior of the implied volatility surface prior to the event. On each known announcement date, we introduce a random jump to the stock price. Applying this idea to extend...

We examine the effect of option listing on the stock-price response to quarterly earnings announcements. We find that option trading reduces the magnitude of the pre-earnings announcement drift. We also present evidence that firms with options exhibit more intensive price reactions to earnings...