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An investigation into the dependence structure of major cryptocurrencies

Author

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  • Saha, Kunal

Abstract

This paper attempts to examine the dependence structure of four major cryptocurrencies chosen by current market capitalisation. It is a well known fact that there is huge volatility in the prices of these cryptocurrencies. The Vine Copula model is used to get some insights about the dependence structure in these asset prices. This is done using daily closing price from August 2015 to May 2018. This information can be used to calculate risk based metrics such as expected shortfall of a portfolio of these currencies. This analysis becomes more important as complex financial instruments (e.g. indices) based on these currencies are being introduced.

Suggested Citation

  • Saha, Kunal, 2018. "An investigation into the dependence structure of major cryptocurrencies," EconStor Preprints 181878, ZBW - Leibniz Information Centre for Economics.
  • Handle: RePEc:zbw:esprep:181878
    as

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    File URL: https://www.econstor.eu/bitstream/10419/181878/1/IFMR_Kunal_Saha.pdf
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    References listed on IDEAS

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    3. Dißmann, J. & Brechmann, E.C. & Czado, C. & Kurowicka, D., 2013. "Selecting and estimating regular vine copulae and application to financial returns," Computational Statistics & Data Analysis, Elsevier, vol. 59(C), pages 52-69.
    4. Michael Rockinger & Eric Jondeau, 2001. "Conditional Dependency of Financial Series: An Application of Copulas," Working Papers hal-00601478, HAL.
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    6. Genest, Christian & Rémillard, Bruno & Beaudoin, David, 2009. "Goodness-of-fit tests for copulas: A review and a power study," Insurance: Mathematics and Economics, Elsevier, vol. 44(2), pages 199-213, April.
    7. Aas, Kjersti & Czado, Claudia & Frigessi, Arnoldo & Bakken, Henrik, 2009. "Pair-copula constructions of multiple dependence," Insurance: Mathematics and Economics, Elsevier, vol. 44(2), pages 182-198, April.
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    10. C. Baek & M. Elbeck, 2015. "Bitcoins as an investment or speculative vehicle? A first look," Applied Economics Letters, Taylor & Francis Journals, vol. 22(1), pages 30-34, January.
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    More about this item

    Keywords

    Vine Copula; Cryptocurrencies; Expected shortfall;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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