@Michael6575 Whatever you do, don't cancel it yourself. If you get any messages asking if you accept the cancellation, say no, this is a weird trick Airbnb uses. The guest has to cancel.
As to a refund, that's up to you, really. If you believe the guest is being truthful and are okay with a refund, then you can do a refund through the resolution center. If you don't believe them or can't afford to give the refund, stick to your cancellation policy and let the guest try to battle it out with Airbnb directly.