Abstract
A subjective probability argument suggests vote-share estimates from polling companies can be interpreted as market prices. The corresponding election constitutes the price at a known future date. This makes an options-pricing approach particularly attractive. In this setting, vote-share estimates, the probability of winning the popular vote and the second-round qualification probability all have a convenient representation in terms of binary options prices. In this article, we develop options-pricing, vote-transfer, and Monte Carlo methods to forecast the French presidential election. The approach fits well with the proportional and regimented two-stage nature of the French election but applies more broadly. Unusually for a French system characterised by uncertainty and constant flux the incumbent President Macron appears in a dominant position throughout the 2017 and 2022 elections albeit with no chance of an outright win in the first round.
Original language | English |
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Number of pages | 13 |
Journal | Journal of the Operational Research Society |
Early online date | 08 Apr 2024 |
DOIs | |
Publication status | Early online date - 08 Apr 2024 |
Keywords
- finance
- Forecasting
- options pricing
- OR in societal problem analysis
- politics
ASJC Scopus subject areas
- Modelling and Simulation
- Strategy and Management
- Statistics, Probability and Uncertainty
- Management Science and Operations Research