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On the Bitcoin price dynamics: an augmented Markov-Switching model with Lévy jumps

Julien Chevallier, Stéphane Goutte (), Khaled Guesmi and Samir Saadi
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Samir Saadi: École de gestion Telfer / Université d'Ottawa - Université d'Ottawa

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Abstract: This study contributes to the existing literature on the empirical characteristics of virtual currency allowing for a dynamic transition between different economic regimes and considering various crashes and rallies over the business cycle, that is captured by jumps. We combine Markov-switching models with Levy jump-diffusion offer a new model that captures the different sub-period of crises over the business cycle, that is captured by jumps. This method also enables to test the relevance of dynamic measures of regime switching concerning the independent pure-jump process, which are not frequently used in the literature. Bitcoin offers something different than a traditional currency; there is potential value of having a network that helps as a secure repository for the common knowledge of all transactions. Besides, the value of Bitcoin fluctuates so wildly that it may be too risky to serve as a credible store of value.

Keywords: Bitcoin; Lévy process; Markov-switching model (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-mon and nep-pay
Date: 2019-05-06
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-02120636
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