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The impact of COVID-19 on commodity options market: Evidence from China

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  • Chen, Jilong
  • Xu, Liao
  • Xu, Hao

Abstract

Considering the severe economic impact of COVID-19, this study examines COVID-19's influence on the Chinese commodity market. The literature shows that COVID-19's influence in China during its abatement period has not been well investigated. We address this issue by the intraday analysis of the volatility from 16 commodity options contracts in the Chinese commodity options market over the period 2019–2021. We demonstrate that while the pandemic eased in China after its initial outbreak, it still significantly affected the volatility of Chinese agricultural commodities options. In contrast, its impacts on the volatility of options for petrochemicals, ores, and metals are negligible. This pattern reflects the role of pandemic-led supply disruptions affecting agricultural commodity prices as necessities, contributing to higher price volatility relative to non-agricultural commodities, which are less volatile.

Suggested Citation

  • Chen, Jilong & Xu, Liao & Xu, Hao, 2022. "The impact of COVID-19 on commodity options market: Evidence from China," Economic Modelling, Elsevier, vol. 116(C).
    • Handle: RePEc:eee:ecmode:v:116:y:2022:i:c:s0264999322002395
    DOI: 10.1016/j.econmod.2022.105998
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    Cited by:

    1. Klose, Jens, 2023. "European exchange rate adjustments in response to COVID-19, containment measures and stabilization policies," Economic Modelling, Elsevier, vol. 128(C).

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    More about this item

    Keywords

    COVID-19; Commodity options; High-frequency data; Realized volatility;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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