TESTING THE NO-ARBITRAGE PARITY CONDITIONS FOR BITCOIN SPOT AND FUTURES PRICES
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Date
2023
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Nazarbayev University Graduate School of Business
Abstract
The study investigates the no-arbitrage parity conditions in Bitcoin spot and futures
markets, focusing on the efficiency of the spot-futures (SFP) and futures spread
parity (FSP) models in estimating the Bitcoin futures prices. Utilizing data from the
Chicago Mercantile Exchange (CME) and Binance exchange, the research analyzes
the relationship between spot and futures prices of Bitcoin, moreover, examines the
relationship between intramarket Bitcoin futures contracts. The study finds that the
mean pricing error of SFP is greater than FSP, indicating the greater efficiency of
FSP in pricing Bitcoin futures. It also explores arbitrage opportunities by testing
the equality of means of the bid-ask spread and mispricing, revealing that arbitrage
opportunities are not consistently present. Few exploitable arbitrage opportunities
in bullish markets are found, but overall, the arbitrage profit is not feasible when
considering the costs such as bid-ask spread.
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Type of access: Gated
Citation
Seifulov, Zh. (2023). Testing The No-Arbitrage Parity Conditions For Bitcoin Spot And Futures Prices. Nazarbayev University Graduate School of Business