Can Fintech indices hedge VIX and global banking volatility? Evidence from a dynamic short-term perspective

Salha Ben Salem (), Halilibrahim Gökgöz (), Azza Béjaoui () and Ahmed Jeribi ()
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Salha Ben Salem: FSEG of Mahdia-Tunisia
Halilibrahim Gökgöz: Afyon Kocatepe University
Azza Béjaoui: Higher School of Commerce of Tunis
Ahmed Jeribi: FSEG of Mahdia-Tunisia

Digital Finance, 2025, vol. 7, issue 4, No 17, 1013-1041

Abstract: Abstract Although many researchers have increasingly analyzed the diversifier, hedge, and safe-haven features of cryptocurrencies, very few studies have investigated the hedging issue of FinTech assets with other assets. This paper analyses if FinTech indices could hedge the uncertainties in different markets in the context of global and banking sector volatilities. The connection between cryptocurrencies and FinTech indices lies in their shared role in financial innovation and market disruption. Both asset classes represent emerging financial technologies that challenge traditional financial systems by offering alternative investment opportunities, payment solutions, and risk diversification strategies. The cADCC-GARCH (corrected Asymmetric Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroscedasticity) model is considered the most adequate choice to estimate appropriately and model correlations among different assets. Using such a framework allows us to better set up dynamic hedge ratios and then time-varying cross-hedging FinTech/stock markets. Our results display the time-varying correlations among different assets, showing a dynamic behavior of the linkages between FinTech indices and GLBLBNK/VIX. Such finding displays that such relationship trending down(up)wards over the period under consideration, particularly during the adverse events. We also report dynamic optimal hedge ratios which imply an ongoing regular demand for rebalancing the hedged positions. Such findings have insightful information for investors and portfolio managers. This research adds to the continuing discussion about how the COVID-19 pandemic and the Russia–Ukraine war have affected the financial market, portfolio composition, and hedging options during these crises. Our findings underscore the distinctive features of Fintech within itself and its significance in international portfolio diversification, particularly under the influence of global adverse events. Our findings have significant implications for developing an efficient diversification strategy.

Keywords: FinTech indices; Portfolio management; Dynamic standpoint; Hedging; Market uncertainty; Adverse events; DCC models (search for similar items in EconPapers)
JEL-codes: C32 F37 G11 G15 G17 G23 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s42521-025-00152-5

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