The price of COVID-19-induced uncertainty in the options market()

This paper investigates the pricing of uncertainty associated with the COVID-19 responses for 28 countries/regions in 2020. We find that such uncertainty is priced in the equity options market. Specifically, there is a price premium for options that provide protection to hedge against price risk, va...

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Detalles Bibliográficos
Autores principales: Li, Jianhui, Ruan, Xinfeng, Zhang, Jin E.
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier B.V. 2022
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8742870/
https://www.ncbi.nlm.nih.gov/pubmed/35035001
http://dx.doi.org/10.1016/j.econlet.2021.110265
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author Li, Jianhui
Ruan, Xinfeng
Zhang, Jin E.
author_facet Li, Jianhui
Ruan, Xinfeng
Zhang, Jin E.
author_sort Li, Jianhui
collection PubMed
description This paper investigates the pricing of uncertainty associated with the COVID-19 responses for 28 countries/regions in 2020. We find that such uncertainty is priced in the equity options market. Specifically, there is a price premium for options that provide protection to hedge against price risk, variance risk, and tail risk caused by a variety of World Health Organization (WHO) announcements and the lockdown announcements from governments on COVID-19. Moreover, such options tend to be more expensive when the governments place stricter restrictions.
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spelling pubmed-87428702022-01-10 The price of COVID-19-induced uncertainty in the options market() Li, Jianhui Ruan, Xinfeng Zhang, Jin E. Econ Lett Article This paper investigates the pricing of uncertainty associated with the COVID-19 responses for 28 countries/regions in 2020. We find that such uncertainty is priced in the equity options market. Specifically, there is a price premium for options that provide protection to hedge against price risk, variance risk, and tail risk caused by a variety of World Health Organization (WHO) announcements and the lockdown announcements from governments on COVID-19. Moreover, such options tend to be more expensive when the governments place stricter restrictions. Elsevier B.V. 2022-02 2022-01-07 /pmc/articles/PMC8742870/ /pubmed/35035001 http://dx.doi.org/10.1016/j.econlet.2021.110265 Text en © 2022 Elsevier B.V. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Li, Jianhui
Ruan, Xinfeng
Zhang, Jin E.
The price of COVID-19-induced uncertainty in the options market()
title The price of COVID-19-induced uncertainty in the options market()
title_full The price of COVID-19-induced uncertainty in the options market()
title_fullStr The price of COVID-19-induced uncertainty in the options market()
title_full_unstemmed The price of COVID-19-induced uncertainty in the options market()
title_short The price of COVID-19-induced uncertainty in the options market()
title_sort price of covid-19-induced uncertainty in the options market()
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8742870/
https://www.ncbi.nlm.nih.gov/pubmed/35035001
http://dx.doi.org/10.1016/j.econlet.2021.110265
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