Title: Bitcoin price dynamics and market attention
Authors: Gianna Figa Talamanca - University of Perugia (Italy) [presenting]
Abstract: Recent developments are addressed about Bitcoin price modeling and related applications. Precisely, we consider a bivariate model to describe the behavior of Bitcoin price and of the investors' attention on the overall network. The attention index affects Bitcoin price through a suitable dependence of the drift and diffusion coefficients and a possible correlation between the sources of randomness represented by the driving Brownian motions. The model is fitted on historical data of Bitcoin prices, by considering the total trading volume and the Google search volume index as proxies for the attention measure. Moreover, a closed formula is computed for European style derivatives on Bitcoin. Finally, we discuss two possible extensions of the model. Precisely, we investigate the relation between the correlation parameter and possible bubble effects in the asset price; further, we consider a multivariate framework to represent the special feature of Bitcoin being traded on several exchanges and we discuss conditions to rule out arbitrage opportunities in this setting.