Value-at-risk and related measures for the Bitcoin

Stavros Stavroyiannis

74 citations0/0 files storedThe Journal of Risk Finance

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Financial Risk and Volatility Modeling Blockchain Technology Applications and Security Market Dynamics and Volatility

Abstract

Purpose The purpose of this paper is to examine the value-at-risk and related measures for the Bitcoin and to compare the findings with Standard and Poor’s SP500 Index, and the gold spot price time series. Design/methodology/approach A GJR-GARCH model has been implemented, in which the residuals follow the standardized Pearson type-IV distribution. A large variety of value-at-risk measures and backtesting criteria are implemented. Findings Bitcoin is a highly volatile currency violating the value-at-risk measures more than the other assets. With respect to the Basel Committee on Banking Supervision Accords, a Bitcoin investor is subjected to higher capital requirements and capital allocation ratio. Practical implications The risk of an investor holding Bitcoins is measured and quantified via the regulatory framework practices. Originality/value This paper is the first comprehensive approach to the risk properties of Bitcoin.

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References

1993On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks 1999Coherent Measures of Risk 1998Evaluating Interval Forecasts 1995Techniques for Verifying the Accuracy of Risk Measurement Models 2010Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold 2010Is gold a safe haven? International evidence 2002On the coherence of expected shortfall 2015Bitcoin, gold and the dollar – A GARCH volatility analysis

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2019Value-at-risk and expected shortfall in cryptocurrencies’ portfolio: a vine copula–based approach 2021The predictive capacity of GARCH-type models in measuring the volatility of crypto and world currencies 2020Long Memory in the Volatility of Selected Cryptocurrencies: Bitcoin, Ethereum and Ripple 2020Skewed non-Gaussian GARCH models for cryptocurrencies volatility modelling 2020Bitcoin option pricing with a SETAR-GARCH model 2022

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