Asset Hedging via Digital Asset Indices

Dimiter Shalvardjiev

Economic Studies journal, 2025, issue 1, 63-88

Abstract: In the contemporary financial landscape, numerous conventional market indices exhibit a pronounced correlation with the S&P 500, the universally acknowledged benchmark. Although contemporary non-institutional investors can access a wide array of indices, their capabilities to effectively hedge these investments remain constrained. This paper proposes expanding the existing options by incorporating non-standard asset classes, focusing on digital assets backed by blockchain technology. The key findings indicate that certain digital asset indices, despite their inherent volatility, can serve as viable hedging tools, presenting a lower correlation with the S&P 500 compared to traditional market indices. The study reveals that digital asset indices, particularly those optimized for liquidity and risk-adjusted returns, significantly enhance portfolio diversification and exhibit hedging efficiencies comparable to, or in some cases, superior to, conventional hedging instruments such as gold.

JEL-codes: G00 G10 G11 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bas:econst:y:2025:i:1:p:63-88

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