Research On Hedging Performance Of Digital Cryptographic Currency Futures

The development of electronic information technology has brought tremendous changes to the traditional financial field.The innovation of Internet financial technology has promoted the change of money form.The increasing popularity of mobile payment has made the emergence of digital money a general trend.With the advent of the Internet financial era,on the one hand,the emergence and development of digital money has made us gradually enter a cashless society.But on the other hand,it also brings great challenges to the central bank's currency issuance and the implementation of relevant policies.Because the digital currency represented by Bitcoin does not have the endorsement of the central bank as the "currency issuer",it is only maintained through the value chain of all participants,and its issuance volume is not determined by the central bank according to the actual situation of economic operation,but by a complex set of algorithms;there is no corresponding relationship with legal currency;and because of Bitcoin.Money is not issued by the central bank,so it is not as compulsory as sovereign currency,which makes the exchange rate between digital currency and legal currency easy to change dramatically with the fluctuation of the market,which is also one of the main reasons for the sharp price fluctuation.Bitcoin futures have attracted unprecedented attention since the Chicago Options Exchange and the Commercial Exchange launched the officially regulated Bitcoin futures contracts in December 2017.But because the price of digital money market represented by Bitcoin fluctuates greatly,it is easy to produce huge risks.Using Bitcoin futures to control the risk of spot price fluctuation of Bitcoin has become a new option.Although the traditional commodity futures hedging strategy research has been relatively mature at home and abroad,there is still a lack of theoretical and empirical research on digital encrypted currency futures hedging represented by Bitcoin.This paper chooses three classical hedging models: OLS model,ECM model and ECMGARCH model.Considering that the ECM-GARCH model is a dynamic hedging model,we also estimate the rolling window of OLS and ECM models.Taking Bitcoin as an example,based on the existing research results,this paper chooses the spot day settlement price of Bitcoin from January 1,2018 to March 31,2019 and the daily settlement price of BTC/USD futures contract launched by the American Commodity Exchange(CME)and XBT/USD futures contract launched by the Chicago Options Exchange(CBOE)to compose two sets of data to compare the optimal hedging ratio of Bitcoin futures.Rate and hedging performance are studied.According to the experimental results,the three hedging models have good performance in bitcoin futures hedging,and the risk aversion ratio is more than 50%.Compared with the three models,under the first set of data(i.e.Bitcoin daily settlement price and BTC/USD futures contract price),the OLS model with rolling window estimation has better hedging performance than the static OLS model,while the ECM model with rolling window has better hedging performance than the static ECM model,while the ECM-GARCH has the worst hedging performance.Under the second set of data(Bitcoin Daily Settlement Price and XBT/USD Futures Contract Price),OLS model with rolling window estimation has the best hedging performance,while ECMGARCH model has the worst hedging performance.This shows that in some cases,the hedging performance of static model is better than that of dynamic model.