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Assessing the Risk of Bitcoin Futures Market: New Evidence

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  • Anupam Dutta

    (University of Vaasa)

Abstract

The main objective of this paper is to forecast the realized volatility (RV) of Bitcoin futures (BTCF) market. To serve our purpose, we propose an augmented heterogenous autoregressive (HAR) model to consider the information on time-varying jumps observed in BTCF returns. Specifically, we estimate the jump-induced volatility using the GARCH-jump process and then consider this information in the HAR model. Both the in-sample and out-of-sample analyses show that jumps offer added information which is not provided by the existing HAR models. In addition, a novel finding is that the jump-induced volatility offers incremental information relative to the Bitcoin implied volatility index. In sum, our results indicate that the HAR-RV process comprising the leverage effects and jump volatility would predict the RV more precisely compared to the standard HAR-type models. These findings have important implications to cryptocurrency investors.

Suggested Citation

  • Anupam Dutta, 2025. "Assessing the Risk of Bitcoin Futures Market: New Evidence," Annals of Data Science, Springer, vol. 12(2), pages 481-497, April.
    • Handle: RePEc:spr:aodasc:v:12:y:2025:i:2:d:10.1007_s40745-024-00517-4
    DOI: 10.1007/s40745-024-00517-4
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    More about this item

    Keywords

    Bitcoin futures market; Realized volatility; Jump-induced volatility; Bitcoin implied volatility index; Leverage effects; HAR-RV models;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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