Abstract
We use the implied volatility slope measures derived from US stock options to examine the impact of COVID-19 risk on the options market. The severity of COVID-19 is measured by the number of new confirmed cases. We find that equity options that are most sensitive to COVID-19 generate a more positive IV slope than less COVID-19-sensitive equity options. Moreover, this measure is more positive and significant during the lockdown period. Our findings suggest that the hedging cost of downside tail risk is more expensive during the high-uncertainty period, the time when COVID-19 is more intensive.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
