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The role of investor sentiment in the valuation of bitcoin and bitcoin derivatives

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  • Rebecca Abraham

Abstract

Bitcoin is the currency of the blockchain, which promises cost reductions for businesses. This paper develops models to value bitcoin, bitcoin futures, and bitcoin options. It provides the theoretical basis for bitcoin pricing. Optimal bitcoin prices are derived at the intersection of an aberrancy utility function, a hyperbolic cosine utility function, and a Bessel utility function with price distributions. Rational investors value bitcoin on the basis of blockchain applications, while irrational investors' value bitcoin based on personal recommendations.

Suggested Citation

  • Rebecca Abraham, 2020. "The role of investor sentiment in the valuation of bitcoin and bitcoin derivatives," International Journal of Financial Markets and Derivatives, Inderscience Enterprises Ltd, vol. 7(3), pages 203-223.
    • Handle: RePEc:ids:ijfmkd:v:7:y:2020:i:3:p:203-223
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    Cited by:

    1. Pierre J. Venter & Eben Maré, 2021. "Univariate and Multivariate GARCH Models Applied to Bitcoin Futures Option Pricing," JRFM, MDPI, vol. 14(6), pages 1-14, June.

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