Bitcoin Has Thin Tails: Modelling Bitcoin Options With Damped Black-Scholes
3 Pages Posted: 23 May 2022
Date Written: May 13, 2022
We examine the distribution of realized Bitcoin daily log-returns and find significantly-thin tails. From there we construct a simple connection back to traditional volatility modelling. And then we discuss how this connection can serve as a foundation to leverage existing derivative quant research to explore cryptocurrency market dynamics. These results also suggest a connection between cryptocurrency exchange structure and trading dynamics.
Keywords: bitcoin, option realized volatility, volatility surface
JEL Classification: C13, C51, G13
Suggested Citation: Suggested Citation
Reiter, Jonathan, Bitcoin Has Thin Tails: Modelling Bitcoin Options With Damped Black-Scholes (May 13, 2022). Available at SSRN: https://ssrn.com/abstract=4108328 or http://dx.doi.org/10.2139/ssrn.4108328
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