Associate Professor Chuanhai Zhang, a researcher of the base, has published a collaborative paper titled "Futures trading activity and the jump risk of spot market: Evidence from the bitcoin market" in the Pacific-Basin Finance Journal.

Abstract:

This paper examines the impacts of Bitcoin futures trading on the jump risk of spot market. Based on 5-min high-frequency data, we use a nonparametric method to detect Lévy-type jumps in Bitcoin and document that Bitcoin prices are subject to both big and small jumps, and the jump risk – captured by jump intensity and jump size– is time varying. We then investigate the changes of the jump risk before and after the Bitcoin futures introduction and find that both the jump intensity and jump size of big and small jumps have decreased, yet the change of the latter is insignificant. Furthermore, we examine whether greater futures trading activity, proxied by unexpected trading volume and open interest, is associated with greater jump risk in the spot market. We document that jump risk Granger-causes futures speculative trading activity while the reverse is not true, and there is no causality between futures hedging activity and jump risk.

Keywords:Cryptocurrency; Bitcoin futures; Lévy jumps; Futures trading activity; High-frequency data

Link: https://doi.org/10.1016/j.pacfin.2023.101950

Teacher profile

Zhang Chuanhai, PhD, Associate Professor, School of Finance, Zhongnan University of Economics and Law. His research interests include financial markets, financial measurement and financial risk, as well as Fintech and big data. His research papers have been published in: Economic Research, Systems Engineering Theory and Practice, Journal of Management Engineering, Mathematical Statistics and Management, Journal of Econometrics, Quantitative Finance, Pacific-Basin Finance Journal, Finance Research Letters, International Review of Financial Analysis and Economic Modelling and other domestic and foreign journals.