Download This PaperCOVID-19 and Market Expectations: Evidence from Option-Implied Densities
10 Pages Posted: 2 Jun 2020 Last revised: 20 Jul 2020
Date Written: June 2, 2020
Abstract
We compare risk-neutral densities from equity index options across several markets during the early phase of the COVID-19 pandemic. These densities reflect market expectations regarding its economic impact. The markets reacted abruptly and simultaneously initially, but with a marked time lag after ignoring the first clear warning signs for several weeks. As the crisis unfolds, option prices increasingly reflect differences in anticipated impact on and economic resiliency of these markets.
Keywords: COVID-19, Risk-neutral Densities, Equity Index Options
JEL Classification: G01, G13
Suggested Citation: Suggested Citation
Hanke, Michael and Kosolapova, Maria and Weissensteiner, Alex, COVID-19 and Market Expectations: Evidence from Option-Implied Densities (June 2, 2020). Available at SSRN: https://ssrn.com/abstract=3616625 or http://dx.doi.org/10.2139/ssrn.3616625
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