MaMaMoMaMa: BTC Options

Abstract

In this paper, we investigate the behavior of the bitcoin (BTC) price through the vanilla options available on the market. We calibrate a series of Markov models on the option surface. In particular, we consider the Black-Scholes model, Laplace model, five Variance Gamma related models and the Heston model. We examine their pricing performance and the stability of the optimal risk-neutral parameters over a period of two months. The analysis proceeds with the construction of BlackScholes and Laplace implied volatity smiles. We conclude with a study of the implied liquidity of BTC call options, based on conic finance theory.

Keywords: cryptocurrency, bitcoin, modelling, calibration

JEL Classification: G10, C10