Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257686 
Year of Publication: 
2020
Citation: 
[Journal:] International Journal of Financial Studies [ISSN:] 2227-7072 [Volume:] 8 [Issue:] 2 [Article No.:] 19 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-18
Publisher: 
MDPI, Basel
Abstract: 
This paper aims at identifying a validated risk model for the cryptocurrency market. We propose a stochastic volatility model with co-jumps in return and volatility (SVCJ) to highlight the role of jumps in returns and volatility in affecting Value-at-Risk (VaR) and Expected Shortfall (ES) in cryptocurrency market. Validation results based on backtesting show that SVCJ model is superior in terms of statistical accuracy of VaR and ES estimates, compared to alternative models such as TGARCH (Threshold GARCH) volatility and RiskMetrics models. The results imply that for the cryptocurrency market, the best performing model is a stochastic process that accounts for both jumps in returns and volatility.
Subjects: 
cryptocurrency market
RiskMetrics
stochastic volatility with co-jumps
threshold GARCH
validation
JEL: 
C22
G11
G12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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