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

Jianhui Li*, Xinfeng Ruan, Jin E. Zhang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


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.

Original languageEnglish
Article number110265
JournalEconomics Letters
Publication statusPublished - Feb 2022
Externally publishedYes


  • COVID-19
  • Government response
  • Options market
  • Uncertainty


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