 Futures trading activity and the jump risk of spot market: Evidence from the bitcoin marketChuanhai Zhang, Huan Ma and Xiaosai Liao Pacific-Basin Finance Journal, 2023, vol. 78, issue C 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 (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:eee:pacfin:v:78:y:2023:i:c:s0927538x23000161 DOI: 10.1016/j.pacfin.2023.101950 Access Statistics for this article Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee More articles in Pacific-Basin Finance Journal from Elsevier |
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