The risk analysis of Bitcoin and major currencies: value at risk approach

Umut Uyar and Ibrahim Korkmaz Kahraman

Journal of Money Laundering Control, 2019, vol. 22, issue 1, 38-52

Abstract: Purpose - This study aims to compare investors of major conventional currencies and Bitcoin (BTC) investors by using the value at risk (VaR) method common risk measure. Design/methodology/approach - The paper used a risk analysis named as VaR. The analysis has various computations that Historical Simulation and Monte Carlo Simulation methods were used for this paper. Findings - Findings of the analysis are assessed in two different aspects of singular currency risk and portfolios built. First, BTC is found to be significantly risky with respect to the major currencies; and it is six times riskier than the singular most risky currency. Second, in terms of inclusion of BTC into a portfolio, which equally weights all currencies, it elevates overall portfolio risk by 98 per cent. Practical implications - In spite of the remarkable risk level, it could be considered that investors are desirous of making an investment on BTC could mitigate their overall exposed risk relatively by building a portfolio. Originality/value - The paper questions the risk level of Bitcoin, which is a digital currency. BTC, a matter of debate in the contemporary period, is seen as a digital currency free from control or supervision of a regulatory board. With the comparison of major currencies and BTC shows that how could be risky of a financial instrument without regulations. However, there is some advice for investors who would like to invest digital currencies despite the risk level in this study.

Keywords: Value at risk; Bitcoin; Major currencies; Money market (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
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:eme:jmlcpp:jmlc-01-2018-0005

DOI: 10.1108/JMLC-01-2018-0005

Access Statistics for this article

Journal of Money Laundering Control is currently edited by Dr Li Hong Xing and Prof Barry Rider

More articles in Journal of Money Laundering Control from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().