Hedging bitcoin with other financial assets

Debdatta Pal and Subrata K. Mitra

Finance Research Letters, 2019, vol. 30, issue C, 30-36

Abstract: We compute optimal hedge ratios between bitcoin and other financial assets by using conditional volatility estimates of different GARCH models for a period over January 03, 2011 to February 19, 2018. Gold is found to provide a better hedge against bitcoin. Following generalized orthogonal GARCH, which offers maximum hedging effectiveness, U.S.$1 long of bitcoin could to be hedged with 70 cents short of gold. Our findings are fairly robust to alternate specifications.

Keywords: Hedging; Bitcoin; GARCH (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (47)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:30:y:2019:i:c:p:30-36

DOI: 10.1016/j.frl.2019.03.034

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