Crypto Asset Portfolio selection
9 Pages Posted: 28 Jul 2021 Last revised: 25 Feb 2022
Date Written: July 25, 2021
Abstract
The aim of this paper is to propose a portfolio selection methodology capable to take into account asset tail co-movements, frequent among crypto assets. To achieve this aim we consider both systemic and tail risks as additional constraints in Markowitz model. We apply the methodology to the observed time series the ten largest crypto-assets, in terms of market capitalization, over the period September 20, 2017 -- December 31, 2020 (1200 daily observations). The results indicate that the portfolios selected considering tail risk are more diversified and, therefore, more resilient to financial shocks.
Keywords: Portfolio Selection, Tail Risk, Extreme Downside Hedge, Systemic risk, Systematic risk.
JEL Classification: C53, C58
Suggested Citation: Suggested Citation