Optimal Bitcoin trading with inverse futures

Jun Deng (), Huifeng Pan (), Shuyu Zhang () and Bin Zou ()
Additional contact information
Jun Deng: University of International Business and Economics
Huifeng Pan: University of International Business and Economics
Shuyu Zhang: Beijing Technology and Business University
Bin Zou: University of Connecticut

Annals of Operations Research, 2021, vol. 304, issue 1, No 6, 139-163

Abstract: Abstract We consider an optimal trading problem for an investor who trades Bitcoin spot and Bitcoin inverse futures, plus a risk-free asset. The investor seeks an optimal strategy to maximize her expected utility of terminal wealth. We obtain explicit solutions to the investor’s optimal strategies under both exponential and power utility functions. Empirical studies confirm that optimal strategies perform well in terms of Sharpe ratio and Sortino ratio and beat the long-only strategy in Bitcoin spot.

Keywords: Bitcoin; Inverse futures; Optimal investment; Utility maximization (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10479-021-04125-w

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