Related papers: Fundamentals of Perpetual Futures
Perpetual futures are contracts without expiration date in which the anchoring of the futures price to the spot price is ensured by periodic funding payments from long to short. We derive explicit expressions for the no-arbitrage price of…
Perpetual swaps are derivative contracts that allow traders to speculate on, or hedge, the price movements of cryptocurrencies. Unlike futures contracts, perpetual swaps have no settlement or expiration in the traditional sense. The funding…
We consider a continuous-time financial market with no arbitrage and no transactions costs. In this setting, we introduce two types of perpetual contracts, one in which the payoff to the long side is a fixed function of the underlyers and…
In cryptocurrency markets, a key challenge for perpetual future issuers is maintaining alignment between the perpetual future price and target value. This study addresses this challenge by exploring the relationship between funding rates…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
In commodity markets the convergence of futures towards spot prices, at the expiration of the contract, is usually justified by no-arbitrage arguments. In this article, we propose an alternative approach that relies on the expected profit…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
Decentralized perpetuals protocols have collectively reached billions of dollars of daily trading volume, yet are still not serious competitors on the basis of trading volume with centralized venues such as Binance. One of the main reasons…
In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for…
Cryptocurrencies are examined through the asset flow equations and experimental asset markets. Since tangible value of a typical cryptocurrency is non-existent, the theory suggests that price will gravitate toward liquidity value, i.e., the…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
We introduce Hermite fractional financial markets, where market uncertainties are described by multidimensional Hermite motions. Hermite markets include as particular cases financial markets driven by multivariate fractional Brownian motion…
Cryptocurrency, the most controversial and simultaneously the most interesting asset, has attracted many investors and speculators in recent years. The visibly significant market capitalization of cryptos also motivates modern financial…
Cryptocoins (i.e., Bitcoin, Ether, Litecoin) are tradable digital assets. Ownerships of cryptocoins are registered on distributed ledgers (i.e., blockchains). Secure encryption techniques guarantee the security of the transactions…
A term structure model in which the short rate is zero is developed as a candidate for a theory of cryptocurrency interest rates. The price processes of crypto discount bonds are worked out, along with expressions for the instantaneous…
This paper examines the relationship between Inverse Perpetual Swap contracts, a Bitcoin derivative akin to futures and the margin funding interest rates levied on BitMEX. This paper proves the Heteroskedastic nature of funding rates and…
This article presents a generic framework for modeling the dynamics of forward curves in commodity market as commodity derivatives are typically traded by futures or forwards. We have theoretically demonstrated that commodity prices are…
We review different classes of cryptocurrencies with emphasis on their economic properties. Pure-asset coins such as Bitcoin, Ethereum and Ripple are characterized by not being a liability of any economic agent and most resemble commodities…
The atomic swap protocol allows for the exchange of cryptocurrencies on different blockchains without the need to trust a third-party. However, market participants who desire to hold derivative assets such as options or futures would also…
Few assets in financial history have been as notoriously volatile as cryptocurrencies. While the long term outlook for this asset class remains unclear, we are successful in making short term price predictions for several major crypto…