PERP3: Funding-anchored asset pricing for cryptocurrency perpetual futures

Perpetual futures were proposed decades before cryptocurrency but only recently became a broad, continuously traded market. Their expected returns still lack a unified model. We show why the leading spot three-factor model cannot simply be transferred to these contracts and develop PERP3, a funding-anchored model for their cross-section. Starting from the zero-entry funding cash flow, we derive one expected-return equation with three states: the common funding anchor, the perpetual–spot basis, and spot valuation. Their traded counterparts are FMKT, FBAS, and FSPV, and their premia pass through two observable channels: the spot leg and the basis–funding leg. Fixed-design out-of-sample tests identify basis as the dominant negative pricing characteristic and spot valuation as the strongest positive one. PERP3 prices portfolios outside factor construction, remains effective across weighting schemes, and outperforms the transplanted spot model. Close spot–perpetual tracking therefore does not make spot factors sufficient for pricing perpetual futures. The paper turns a decades-old contract idea into a unified asset-pricing framework for the modern perpetual-futures market.