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A Quantitative Analysis On Bitmex Perpetual Inverse Futures Xbtusd Contract, Yue Wu
A Quantitative Analysis On Bitmex Perpetual Inverse Futures Xbtusd Contract, Yue Wu
Undergraduate Economic Review
The perpetual inverse futures contract is a recent and most popularly traded cryptocurrency derivative over crypto derivatives exchanges. Exchanges implement a liquidation mechanism that terminates positions which no longer satisfy maintenance requirements. In this study, we use regression, stochastic calculus, and simulation methods to provide a quantitative description of the wealth/return process for holding an XBTUSD contract on BitMEX, examine the funding rate and index price properties, and relate liquidation to leverage as a stopping time problem. The results will help investors understand liquidation to optimize their trading strategy and researchers in studying the design of crypto derivatives.