A STATISTICAL RISK ASSESSMENT OF BITCOIN AND ITS EXTREME TAIL BEHAVIOR

Joerg Osterrieder () and Julian Lorenz ()
Additional contact information
Joerg Osterrieder: School of Engineering, Zurich University of Applied Sciences, Technikumstrasse 9, 8401 Winterthur, Switzerland
Julian Lorenz: Independent Researcher, Switzerland

Annals of Financial Economics (AFE), 2017, vol. 12, issue 01, 1-19

Abstract: We provide an extreme value analysis of the returns of Bitcoin. A particular focus is on the tail risk characteristics and we will provide an in-depth univariate extreme value analysis. Those properties will be compared to the traditional exchange rates of the G10 currencies versus the US dollar. For investors, especially institutional ones, an understanding of the risk characteristics is of utmost importance. So for Bitcoin to become a mainstream investable asset class, studying these properties is necessary. Our findings show that the bitcoin return distribution not only exhibits higher volatility than traditional G10 currencies, but also stronger non-normal characteristics and heavier tails. This has implications for risk management, financial engineering (such as bitcoin derivatives) — both from an investor's as well as from a regulator's point of view. To our knowledge, this is the first detailed study looking at the extreme value behavior of the cryptocurrency Bitcoin.

Keywords: Bitcoin; digital currencies; extreme value theory; tail events; risk management (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2010495217500038
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:afexxx:v:12:y:2017:i:01:n:s2010495217500038

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2010495217500038

Access Statistics for this article

Annals of Financial Economics (AFE) is currently edited by Michael McAleer

More articles in Annals of Financial Economics (AFE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().