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
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)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:13:y:2020:i:7:p:157-:d:386045
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