Proxy-Hedging of Bitcoin Exposures With Altcoins

29 Pages Posted: 20 May 2020

See all articles by Dominique Guegan

Dominique Guegan

Université Paris I Panthéon-Sorbonne

Marius Frunza

Schwarzthal Tech; Schwarzthal Kapital

Rostislav Haliplii

Université Paris I Panthéon-Sorbonne

Date Written: February 25, 2020

Abstract

The aim of this research is to explore the associated risks with hedging in cryptocurrencies markets. It focuses on finding the most effective proxy hedge instrument for the Bitcoin-USD market. Due to its particularities, this market does not exhibit the same features as traditional financial markets do. In appearance, it seems very related to other altcoins (alternative coins), but in reality, it exhibits unusual volatility clustering effects. This behaviour has a direct impact on the hedging strategies of business exposed to crypto-currencies, including the hedge funds, mining farms or ICO projects. The paper explores the econometric features of Bitcoin and other Altcoins and underlines the need for fat tail distributions and volatility clustering models. Also, it examines the density forecasting capacity of various proxy hedge instruments including Bitcoin, Bitcoin Cash and Ether exchange rates

Keywords: Bitcoin, Altcoins, hedging, volatility modelling, portfolio risk management

JEL Classification: G02; G15

Suggested Citation

Guegan, Dominique and Frunza, Marius and Haliplii, Rostislav, Proxy-Hedging of Bitcoin Exposures With Altcoins (February 25, 2020). Available at SSRN: https://ssrn.com/abstract=3569616 or http://dx.doi.org/10.2139/ssrn.3569616

Dominique Guegan

Université Paris I Panthéon-Sorbonne ( email )

106 avenue de lhopital
75634 Paris Cedex 13
Paris, IL
France

Marius Frunza (Contact Author)

Schwarzthal Tech ( email )

231b Business design Center
Upper Street
London, London N1 0QH
United Kingdom

HOME PAGE: http://www.schwarzthal.tech

Schwarzthal Kapital ( email )

34 quai de Dion Bouton
La Defense Puteaux, 92800
France

Rostislav Haliplii

Université Paris I Panthéon-Sorbonne ( email )

France

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