Rogalski-Tinic have reported a monthly pattern in ex post stock return variances that differs between small and large market capitalization firms. Maloney-Rogalski find that option prices reflect these monthly patterns ex ante. This study extends Maloney-Rogalski's work by devising an...

This paper extends Geske's (1979a) compound European call option pricing model and the Roll (1977), Geske (1979b), and Whaley (1981) (RGW) American call pricing model to the case where the variance of the underlying asset changes deterministically. The theoretical analysis shows that the...