Time-Varying Coefficient DAR Model and Stability Measures for Stablecoin Prices: An Application to Tether

Antoine Djobenou, Emre Inan and Joann Jasiak

Papers from arXiv.org

Abstract: This paper examines the dynamics of Tether, the stablecoin with the largest market capitalization. We show that the distributional and dynamic properties of Tether/USD rates have been evolving from 2017 to 2021. We use local analysis methods to detect and describe the local patterns, such as short-lived trends, time-varying volatility and persistence. To accommodate these patterns, we consider a time varying parameter Double Autoregressive tvDAR(1) model under the assumption of local stationarity of Tether/USD rates. We estimate the tvDAR model non-parametrically and test hypotheses on the functional parameters. In the application to Tether, the model provides a good fit and reliable out-of-sample forecasts at short horizons, while being robust to time-varying persistence and volatility. In addition, the model yields a simple plug-in measure of stability for Tether and other stablecoins for assessing and comparing their stability.

Date: 2023-01
New Economics Papers: this item is included in nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://arxiv.org/pdf/2301.00509 Latest version (application/pdf)

Related works:
Journal Article: Time-varying coefficient DAR model and stability measures for stablecoin prices: An application to Tether (2023)
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:arx:papers:2301.00509

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators (help@arxiv.org).