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Modeling Bitcoin price volatility: long memory vs Markov switching
Eurasian Economic Review ( IF 2.5 ) Pub Date : 2021-07-05 , DOI: 10.1007/s40822-021-00180-7
Walid Chkili 1, 2
Affiliation  

The aim of this paper is to identify the best model to describe the volatility dynamics of Bitcoin prices for the turbulent period 2013–2020. We use two types of models namely the long memory model and Markov switching model. Empirical results point out the presence of long memory in the volatility dynamics of the Bitcoin market. In addition, the FIGARCH model that explicitly accounts for long memory outperforms all other models in modeling the volatility of the Bitcoin prices. The finding has several implications for portfolio diversification, hedging strategy and Value at Risk assessment. Such analysis guides international investors towards the optimal portfolio diversification and the effective hedging instruments.



中文翻译:

比特币价格波动建模:长记忆与马尔可夫转换

本文的目的是确定描述 2013-2020 年动荡时期比特币价格波动动态的最佳模型。我们使用两种类型的模型,即长记忆模型和马尔可夫切换模型。实证结果表明比特币市场的波动动态中存在长期记忆。此外,明确考虑长期记忆的 FIGARCH 模型在模拟比特币价格波动方面的表现优于所有其他模型。这一发现对投资组合多样化、对冲策略和风险价值评估有几个影响。这种分析指导国际投资者实现最佳的投资组合多元化和有效的对冲工具。

更新日期:2021-07-06
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