Impacts of pandemic shocks on China's financial options volatility: Evidence from COVID-19 crisis

Jingjing Meng, Qilin Qin and Mei Yu

Pacific-Basin Finance Journal, 2025, vol. 92, issue C

Abstract: Using a model-free method, this paper calculates higher-order moments of daily data, such as implied variance for the SSE 50 ETF options. The asymmetric relationship between returns and the implied higher-order moments of options is analyzed using Quantile Regression (QRM) and the Generalized Method of Moments (GMM). The empirical results showed that from February 2015 to May 2024, the concurrent returns significantly affected the implied volatility, implied skewness, and implied kurtosis of the options. Moreover, negative returns have a greater impact on implied volatility, indicating the presence of asymmetry. By using quantile regression, it is found that asymmetry is more significant when volatility is at the 90th percentile of the upper quantile range. Similar results are observed in regressions involving implied skewness and implied kurtosis. The paper explains the reasons for the asymmetric relationship in China's options market from the perspectives of heuristics and representative bias in behavioral theories. And during the COVID-19 pandemic period, the asymmetry became more pronounced due to changes in investors' risk perception and behavior. The findings of this paper are of theoretical and practical significance for understanding the relationship between returns and implied volatility in China's options market, which also provides references for the decision-makers in departments.

Keywords: Options; Implied higher-order moments; Asymmetry (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X25001118
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001118

DOI: 10.1016/j.pacfin.2025.102774

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().