GLMY Path Homology Reveals Structural Reorganization in Cryptocurrency Options Markets
Published:
This working paper studies how financial stress reorganizes the directed transmission structure of cryptocurrency options markets. Using transaction-level Bitcoin (BTC) and Ethereum (ETH) options data from Deribit, it constructs directed graph families for implied-volatility spillovers and signed trading pressure, then applies Grigor’yan-Lin-Muranov-Yau (GLMY) path homology to measure higher-order market organization.
Authors:
Jiajing Sun, Qi Zhang, Junda Wu, Xing Yan, Xueda Wei, Shing-Tung Yau, and Fei Long.
Summary and Contribution:
The paper develops a topology-based framework for detecting structural reorganization in derivatives markets. Rather than measuring stress only through large price moves, realized volatility, correlations, or network density, it asks how pressure travels across option contracts indexed by expiry, moneyness, and option type.
The analysis constructs two directed networks for each market:
- an implied-volatility spillover network
- a signed trading-pressure network
GLMY path homology is then used to study how higher-order directed transmission structure changes as weak links are removed.
Evidence:
The results show synchronized and asset-specific bursts in BTC and ETH option-market topology. On the aligned common sample, the BTC-ETH regime map distinguishes BTC-only, ETH-only, synchronized, and quiet windows. BTC-only and ETH-only windows are associated with more negative average future 30-day minimum drawdowns than quiet windows, while synchronized windows exhibit distinct stablecoin and broader-market stress patterns.
Availability:
The manuscript is not hosted on this website due to copyright considerations.