Volatility and Asymmetric Effect of Crude Oil Options on Crude Oil Market: Empirical Evidence from China

Abstract

Based on daily data, this paper uses the GARCH model family to empirically study the impact of crude oil option launch on the volatility and asymmetric leverage effect of crude oil futures market variables (futures price, trading volume, open interest, inventory).The conclusion is as follows: Regardless of the impact of the COVID-19, the launch of crude oil options has a long-term volatility impact on price, open interest and inventory volatility in addition to trading volume, and only has a long-term volatility impact on prices under the influence of COVID-19.Regardless of whether the impact of COVID-19 is considered, the launch of crude oil options has intensified the volatility of price yield, reduced the volatility of trading volume, open interest and inventory, and Considering COVID-19 influence, the volatility of crude oil futures prices yield has weakened, and the degree of weakening of trading volume fluctuations has decreased. Regardless of the impact of COVID-19, crude oil futures prices, trading volume, open interest, and inventory volatility all have negative asymmetric leverage effects, and the impact of bearish news is greater than the impact of bullish news. Considering the introduction of crude oil options under the influence of COVID-19: the fluctuation of crude oil futures prices yield has changed from negative asymmetry to positive asymmetric leverage effect. The asymmetric leverage effect of negative fluctuations in crude oil futures trading volume becomes smaller and decreases less than the leverage effect without considering the impact of COVID-19 after the listing of crude oil options. Fluctuations in open interest and inventory have weakened the negative asymmetric leverage effect after the launch of crude oil options. Finally, relevant policy suggestions are given for the construction of the domestic options market.