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An application of extreme value theory to cryptocurrencies

Author

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  • Gkillas, Konstantinos
  • Katsiampa, Paraskevi

Abstract

We study the tail behaviour of the returns of five major cryptocurrencies. By employing an extreme value analysis and estimating Value-at-Risk and Expected Shortfall as tail risk measures, we find that Bitcoin Cash is the riskiest, while Bitcoin and Litecoin are the least risky cryptocurrencies.

Suggested Citation

  • Gkillas, Konstantinos & Katsiampa, Paraskevi, 2018. "An application of extreme value theory to cryptocurrencies," Economics Letters, Elsevier, vol. 164(C), pages 109-111.
  • Handle: RePEc:eee:ecolet:v:164:y:2018:i:c:p:109-111
    DOI: 10.1016/j.econlet.2018.01.020
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    References listed on IDEAS

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    5. Longin, Francois, 2005. "The choice of the distribution of asset returns: How extreme value theory can help?," Journal of Banking & Finance, Elsevier, vol. 29(4), pages 1017-1035, April.
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    8. Gkillas (Gillas), Konstantinos & Tsagkanos, Athanasios & Siriopoulos, Costas, 2016. "The risk in capital controls," Finance Research Letters, Elsevier, vol. 19(C), pages 261-266.
    9. Nadarajah, Saralees & Chu, Jeffrey, 2017. "On the inefficiency of Bitcoin," Economics Letters, Elsevier, vol. 150(C), pages 6-9.
    10. Cheah, Eng-Tuck & Fry, John, 2015. "Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin," Economics Letters, Elsevier, vol. 130(C), pages 32-36.
    11. Ibragimov, Rustam & Prokhorov, Artem, 2016. "Heavy tails and copulas: Limits of diversification revisited," Economics Letters, Elsevier, vol. 149(C), pages 102-107.
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    13. Longin, François & Pagliardi, Giovanni, 2016. "Tail relation between return and volume in the US stock market: An analysis based on extreme value theory," Economics Letters, Elsevier, vol. 145(C), pages 252-254.
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    Citations

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    Cited by:

    1. Saha, Kunal, 2018. "An investigation into the dependence structure of major cryptocurrencies," EconStor Preprints 181878, ZBW - Leibniz Information Centre for Economics.
    2. repec:eee:ecolet:v:173:y:2018:i:c:p:122-127 is not listed on IDEAS
    3. repec:eee:finana:v:62:y:2019:i:c:p:182-199 is not listed on IDEAS
    4. Sokic, Alexandre, 2018. "Bitcoin and hyperdeflation : an optimizing monetary approach," MPRA Paper 90603, University Library of Munich, Germany.
    5. repec:eee:energy:v:168:y:2019:i:c:p:160-168 is not listed on IDEAS
    6. repec:gam:jjrfmx:v:12:y:2019:i:1:p:17-:d:199465 is not listed on IDEAS
    7. repec:vrs:aicuec:v:65:y:2018:i:2:p:97-117:n:7 is not listed on IDEAS
    8. repec:eee:phsmap:v:525:y:2019:i:c:p:1063-1079 is not listed on IDEAS
    9. repec:gam:jjrfmx:v:12:y:2019:i:2:p:52-:d:218986 is not listed on IDEAS
    10. repec:eee:ecolet:v:171:y:2018:i:c:p:93-96 is not listed on IDEAS
    11. Bação Pedro & Duarte António Portugal & Sebastião Helder & Redzepagic Srdjan, 2018. "Information Transmission Between Cryptocurrencies: Does Bitcoin Rule the Cryptocurrency World?," Scientific Annals of Economics and Business, Sciendo, vol. 65(2), pages 97-117, June.
    12. repec:eee:ecolet:v:171:y:2018:i:c:p:225-229 is not listed on IDEAS
    13. repec:eee:ememar:v:38:y:2019:i:c:p:364-376 is not listed on IDEAS
    14. repec:eee:ecofin:v:48:y:2019:i:c:p:32-47 is not listed on IDEAS

    More about this item

    Keywords

    Cryptocurrency; Bitcoin; Extreme value analysis; Value-at-Risk; Expected shortfall;

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G01 - Financial Economics - - General - - - Financial Crises

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