Key Takeaways
This paper introduces two types of perpetual contracts within a continuous-time financial market with no arbitrage and no transactions costs.
It derives model-free expressions for the funding rate and discount rate of these perpetual contracts as well as replication strategies for the short side.
The paper aims to clearly define perpetuals, and illustrate through these examples how specific perpetual contracts relate to traditional financial instruments such as variance swaps and leveraged exchange traded funds.
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