Crypto Perpetual Futures Arbitrage
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Fundamentals of Perpetual Futures
Songrun He; Asaf Manela; Omri Ross; Victor von Wachter
- Washington University in St. Louis
- ?Washington University in St. Louis - John M. Olin Business School
- Brandman University
- ?Reichman University
- DKUniversity of Copenhagen
- ?University of Copenhagen - Department of Computer Science
Strategy in a nutshell
This strategy focuses on Bitcoin arbitrage by analyzing hourly perpetual futures and spot prices from Binance, adjusting for trading costs and risk-free rates. A two-threshold model identifies when to long or short positions, optimizing parameters monthly to maximize Sharpe Ratio.
Economic rationale
The strategy exploits price convergence between Bitcoin perpetual futures and spot prices. By taking positions when deviations exceed thresholds, it profits from the predictable correction of crypto futures toward arbitrage-free levels.
Backtest performance
Annualised return7.58%
Volatility4.4%
Sharpe ratio1.72
Win rate71%