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Study of the dynamic of Bitcoin's price

Author

Listed:
  • Julien Chevallier

    (UP8 - Université Paris 8 Vincennes-Saint-Denis)

  • Stéphane Goutte

    (UP8 - Université Paris 8 Vincennes-Saint-Denis)

  • Khaled Guesmi

    (IPAG Paris - IPAG Paris)

  • Samir Saadi

    (École de gestion Telfer / Université d'Ottawa - University of Ottawa [Ottawa])

Abstract

This study contributes to the existing literature on the empirical characteristics of virtual currency allowing for dynamic transition between different economic regimes and considering various crashes and rallies over the business cycle, that are captured by jumps. We combine Markov-switching models with Levy jump-diffusion offer a new model that captures the different sub-period of crises over the business cycle, that are captured by jumps. This method also enables to test the relevance of dynamic measures of regime switching with respect to independent pure-jump process, which are not frequently used in the literature. Bitcoin offer something different than a traditional currency; there is potential value of having a network that helps as a secure repository for the common knowledge of all transactions. In addition, value of bitcoin fluctuates so wildly that it may be too risky to serve as a credible store of value.

Suggested Citation

  • Julien Chevallier & Stéphane Goutte & Khaled Guesmi & Samir Saadi, 2019. "Study of the dynamic of Bitcoin's price," Working Papers halshs-02175669, HAL.
    • Handle: RePEc:hal:wpaper:halshs-02175669
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02175669
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    References listed on IDEAS

    as
    1. Stéphane Goutte & Benteng Zou, 2012. "Continuous time regime switching model applied to foreign exchange rate," Working Papers hal-00643900, HAL.
    2. Baele, Lieven, 2005. "Volatility Spillover Effects in European Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(2), pages 373-401, June.
    3. Mitya Boyarchenko & Svetlana Boyarchenko, 2011. "Double Barrier Options In Regime-Switching Hyper-Exponential Jump-Diffusion Models," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 14(07), pages 1005-1043.
    4. Ang, Andrew & Bekaert, Geert, 2002. "Regime Switches in Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 163-182, April.
    5. Ballotta, Laura, 2005. "A Lévy process-based framework for the fair valuation of participating life insurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 37(2), pages 173-196, October.
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    Cited by:

    1. Saketh Aleti & Bruce Mizrach, 2021. "Bitcoin spot and futures market microstructure," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(2), pages 194-225, February.

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    More about this item

    Keywords

    Bitcoin; Jump process; Markov-switching model;
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