COVID-19 and market expectations: Evidence from option-implied densities

Econ Lett. 2020 Oct:195:109441. doi: 10.1016/j.econlet.2020.109441. Epub 2020 Jul 25.

Abstract

We compare risk-neutral densities from equity index options across several countries during the early phase of the COVID-19 pandemic. The initial reaction in all analyzed markets was late, abrupt and simultaneous. Only a few weeks later, densities started to differ across markets.

Keywords: COVID-19; Equity index options; Risk-neutral densities.