Pricing Cryptocurrency options: the case of CRIX and BitcoinCathy Yi-Hsuan Chen, Wolfgang Härdle, Ai Jun Hou and Weining Wang No 2018-004, IRTG 1792 Discussion Papers from Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series" Abstract: The CRIX (CRyptocurrency IndeX) has been constructed based on a number of cryptos and provides a high coverage of market liquidity, hu.berlin/crix. The crypto currency market is a new asset market and attracts a lot of investors recently. Surprisingly a market for contingent claims hat not been built up yet. A reason is certainly the lack of pricing tools that are based on solid financial econometric tools. Here a first step towards pricing of derivatives of this new asset class is presented. After a careful econometric pre-analysis we motivate an affine jump diffusion model, i.e., the SVCJ (Stochastic Volatility with Correlated Jumps) model. We calibrate SVCJ by MCMC and obtain interpretable jump processes and then via simulation price options. The jumps present in the cryptocurrency fluctutations are an essential component. Concrete examples are given to establish an OCRIX exchange platform trading options on CRIX. Keywords: CRyptocurrency IndeX; CRIX; Bitcoin; Cryptocurrency; SVCJ; Option pricing; OCRIX (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:zbw:irtgdp:2018004 Access Statistics for this paper More papers in IRTG 1792 Discussion Papers from Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series" Contact information at EDIRC. |
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