Recovering risk aversion from Bitcoin option prices and realized returns

【Author】 Cheng, Zhiyong

【Source】APPLIED ECONOMICS LETTERS

【影响因子】1.287

【Abstract】This study recovers the Bitcoin option-implied risk aversion by jointly estimating a cross-sectional dataset of option prices and time-series data of realized returns on underlying asset prices. The empirical analysis of Bitcoin options on Deribit shows that the risk aversion function exhibits a peak shape, with the level of implied risk aversion of Bitcoin options ranging from $ - 0.2$-0.2 to 0.05, which is significantly lower than that of the traditional options market; furthermore, maturity affects the level of option-implied risk aversion, with shorter maturity implying higher risk-aversion levels. Moreover, our research indicates that after halving of Bitcoin, investors' risk aversion function becomes higher and steeper than before.

【Keywords】Bitcoin option; risk aversion; risk-neutral density; subjective density

【发表时间】2024 2024 JUL 22

【收录时间】2024-07-29

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