Minimum-variance hedging of Bitcoin inverse futures

Jun Deng, Huifeng Pan, Shuyu Zhang and Bin Zou

Applied Economics, 2020, vol. 52, issue 58, 6320-6337

Abstract: We formulate an optimal hedging problem of Bitcoin inverse futures under the minimum-variance framework. We obtain the optimal hedging strategy in closed forms for both short and long hedges and compute hedging effectiveness under the optimal strategy. Our empirical analyses show that the optimal hedging strategy achieves superior effectiveness in reducing risk and outperforms the naïve hedge in all scenarios.

Date: 2020
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DOI: 10.1080/00036846.2020.1789549

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