Pricing Cryptocurrency Options

【Author】 Hou, Ai Jun; Wang, Weining; Chen, Cathy Y. H.; Hardle, Wolfgang Karl

【Source】JOURNAL OF FINANCIAL ECONOMETRICS

【影响因子】3.976

【Abstract】Cryptocurrencies (CCs), especially bitcoin (BTC), which comprises a new digital asset class, have drawn extraordinary worldwide attention. The characteristics of the CC/BTC include a high level of speculation, extreme volatility and price discontinuity. We propose a pricing mechanism based on a stochastic volatility with a correlated jump (SVCJ) model and compare it to a flexible cojump model by Bandi and Reno (; r t). The estimation results of both models confirm the impact of jumps and cojumps on options obtained via simulation and an analysis of the implied volatility curve. We show that a sizeable proportion of price jumps is significantly and contemporaneously anticorrelated with jumps in volatility. Our study comprises pioneering research on pricing BTC options. We show how the proposed pricing mechanism underlines the importance of jumps in CC markets.

【Keywords】CRIX; bitcoin; cryptocurrency; SVCJ; option pricing; jumps

【发表时间】2020 SPR

【收录时间】2022-01-02

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