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The COVID‐19 risk in the Chinese option market – Li – – International Review of Finance

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INTRODUCTION

The COVID-19 outbreak originated in the city of Wuhan, China, in December 2019. The virus had spread to other cities in China and many other countries in less than a month. China instigated the lockdown in Wuhan on January 23, 2020, which had a great effect in containing the spread of the virus (Yuan et al., 2020). On April 8, 2020, when Wuhan had reported zero daily cases of infection and deaths for the most days in 3 weeks, China lifted the lockdown in Wuhan, marking the beginning of China’s return to normality. In this article, we explore the Chinese equity option market’s sensitivity to the COVID-19 severity during the lockdown of Wuhan, that is, from January 23, 2020 to April 9, 2020 (the lockdown period, hereinafter).

We employ a unique dataset of the Shanghai Shenzhen CSI 300 Stock Index (CSI 300 Index) options to examine the impact of COVID-19 on…

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