Download This PaperWhat is the Expected Return on Bitcoin? Extracting the Term Structure of Returns from Options Prices
14 Pages Posted: 9 Oct 2021 Last revised: 29 Nov 2021
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What is the Expected Return on Bitcoin? Extracting the Term Structure of Returns from Options Prices
Number of pages: 14
Posted: 09 Oct 2021
Last Revised: 04 Jan 2022
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What Is the Expected Return on Bitcoin? Extracting the Term Structure of Returns from Options Prices
Number of pages: 13
Posted: 05 Oct 2021
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Abstract
We infer the forward-looking Bitcoin risk premium from options contracts. Using data from 2018 to 2020, we show that the expected excess returns for Bitcoin are time-varying and significantly higher than in equities or gold, averaging almost 80% per annum. A temporal analysis of the term structure of Bitcoin risk premia reveals an upward sloping term structure during Bitcoin bull markets and downward sloping during Bitcoin bear markets.
Keywords: Bitcoin, cryptocurrency, expected return, term structure, risk premium
Suggested Citation: Suggested Citation
Foley, Sean and Li, Simeng and Malloch, Hamish and Svec, Jiri, What is the Expected Return on Bitcoin? Extracting the Term Structure of Returns from Options Prices. Available at SSRN: https://ssrn.com/abstract=3939413
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