Time-frequency volatility connectedness across exchanges and between Bitcoin-Ethereum spot-perpetual instruments: a TVP-VAR approach

Abstract

This study investigates time-frequency volatility transmission of both cross-exchange instrument networks and cross-instrument exchange networks of crypto-markets under a unified time-varying parameter vector autoregression (TVP-VAR) framework. 5-minute closing prices of 16 variables throughout the 2021-2025 period are sampled to form the two types of networks by instrument and by exchange, comprising spot and perpetual instruments of Bitcoin (BTC) and Ethereum (ETH) on Binance, OKX, Bitget, and Bitfinex. The hourly logarithmic realized volatility is aggregated to estimate both the time- and frequency-domain connectedness partitioned into short- (1-8 hours), mid- (8-24 hours), and long-term (beyond 24 hours) components. The results indicate that the total connectedness of instrument networks uniformly exceeds that of exchange networks. The long-term component prevails, while the short-term component remains non-negligible with episodic amplification. Bitfinex functions as the sole net receiver across instrument networks, whereas Binance, OKX, and Bitget act as net transmitters. Within exchange networks, ETH instruments more frequently transmit volatility to BTC ones beyond eight hours, while this direction reverses within the 8-hour horizon. Spot instruments dominate perpetuals on OKX, Bitget, and Bitfinex with Binance as the main exception. Eight historical events elicit heterogeneous response modes contingent on the nature of the shocks, with the LUNA collapse and FTX crisis as the most influential in-sample events. The findings carry implications for cross-venue risk monitoring and horizon-aware portfolio management.