Pricing Power Perpetual Futures

7 Pages Posted: 28 Apr 2023 Last revised: 31 Jul 2023

See all articles by Jack Kim

Jack Kim

Stanford University - Department of Management Science & Engineering

Kristof Lommers

University of Oxford, Said Business School

Boris Skidan

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Viktor Smits

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Date Written: April 18, 2023

Abstract

This study discusses pricing of power perpetual futures where it expands on the existing framework that is based on deterministic volatility. Perpetual futures have been initially suggested by Shiller (1993) to help create derivatives markets in illiquid assets. Whereas they failed to gain traction in traditional asset markets, perpetual fu- tures have been heavily used in crypto trading where they are the main derivatives instruments. Power perpetual futures have been recently introduced as a leveraged version of perpetual futures with a more asymmetric payoff structure. Traditionally people have assumed deterministic volatility in its pricing, and in this paper we intro- duce power perpetual futures pricing with stochastic volatility.

Suggested Citation

Kim, Jack and Lommers, Kristof and Skidan, Boris and Smits, Viktor, Pricing Power Perpetual Futures (April 18, 2023). Available at SSRN: https://ssrn.com/abstract=4422657 or http://dx.doi.org/10.2139/ssrn.4422657

Jack Kim

Stanford University - Department of Management Science & Engineering ( email )

473 Via Ortega
Stanford, CA 94305-9025
United States

Kristof Lommers (Contact Author)

University of Oxford, Said Business School ( email )

Oxford, OX1 5NY
United Kingdom

Boris Skidan

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Viktor Smits

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