Hedging with Automatic Liquidation and Leverage Selection on Bitcoin Futures

Explore hedging strategies for Bitcoin futures in this 51-minute lecture by Carol Alexander from the University of Sussex. Delve into the world of cryptocurrency derivatives trading, focusing on perpetual futures contracts and the Binance BTCUSDT funding rate. Examine clearing activities, liquidation protocols, and various speculation metrics including the Turnover Index and Liquidation Index. Learn about implied leverage, margin constraints, and parameter estimation for optimal hedge positions. Analyze empirical results and draw conclusions on effective hedging techniques for Bitcoin futures with automatic liquidation and leverage selection.

Intro
Overview
Outline
1. Who Hedges Bitcoin - and How?
Perpetual Futures Contracts
Binance BTCUSDT Funding Rate
II. Trading on Centralised Crypto Derivatives Exchanges
Clearing Activities: Liquidation Protocol
III. Speculation Metrics
Turnover Index Garcia et al. (1986)
Liquidation Index
Implied Leverage
Adding the Margin Constraint
Parameter Estimation
Size of Optimal Hedge Position
Empirical Design
Empirical Results
Conclusions