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Bitcoin Price Risk—A Durations Perspective

Thomas Dimpfl () and Stefania Odelli ()
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Stefania Odelli: School of Business and Economics, University of Tübingen, Sigwartstr. 18, 72076 Tübingen, Germany

Journal of Risk and Financial Management, 2020, vol. 13, issue 7, 1-18

Abstract: An important aspect of liquidity is price risk, i.e., the risk that a small transaction leads to a large price change. This usually happens in a thin market, when trading opportunities are scarce and the time between subsequent trades is long. We rely on an autoregressive conditional duration model to extract the probability of a substantial price event in a particular time interval and, thus, an intraday risk profile. Our findings show that price risk is highest at times when European and U.S. investors do not trade. In a second step, we relate daily aggregates to characteristics of the Bitcoin blockchain and investigate whether investors account for features like confirmation time or fees when timing their orders.

Keywords: bitcoin; duration; risk; microstructure (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
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