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The relationship between implied volatility and cryptocurrency returns

Erdinc Akyildirim, Shaen Corbet (), Brian Lucey (), Ahmet Sensoy and Larisa Yarovaya ()

Finance Research Letters, 2020, vol. 33, issue C

Abstract: We analyse the relationship between the price volatility of a broad range of cryptocurrencies and that of implied volatility of both United States and European financial markets as measured by the VIX and VSTOXX respectively. Overall, our results indicate the existence of time-varying positive interrelationships between the conditional correlations of cryptocurrencies and financial market stress. Further, these correlations are found to increase substantially during periods of high financial market stress, indicating that the contagion of significant financial market fear influences these new financial products.

Keywords: Cryptocurrencies; Volatility; VIX; VSTOXX; GARCH; DCC-GARCH (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319303381

DOI: 10.1016/j.frl.2019.06.010

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