Journal
RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
Volume 59, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.ribaf.2021.101567
Keywords
Gram Charlier series; Value-at-Risk; Expected shortfall; Median shortfall; Backtesting; Cryptocurrencies
Categories
Funding
- Consejeria de Eduacion, Junta de Castilla y Leon [SA049G19]
- FAPA-Uniandes [PR.3.2016.2807]
- Fundacion Banco Santander
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This paper establishes a brand-new perspective of analyzing the risk of crypto assets through a semi-nonparametric approach and suggests Median Shortfall as a robust and reliable risk measure for cryptocurrencies. The evidence supports Median Shortfall at 98.31% and 98.51% confidence levels as accurate alternatives to Value-at-Risk at 99% and Expected Shortfall at 97.5%.
This paper establishes a brand-new perspective of analyzing the risk of crypto assets through a semi-nonparametric approach, discussing its theoretical advantages and testing its performance compared to parametric approaches and in terms of backtesting techniques and different risk measures: Value-at-Risk, Expected Shortfall and Median Shortfall. Our comprehensive analysis for six cryptocurrencies shows that flexible semi-nonparametric approaches outperform risk measures of most crypto assets (particularly Bitcoin) and tend to provide the most conservative risk assessment. Furthermore, we propose the Median Shortfall as a robust-to-outliers and reliable risk measure for cryptocurrencies and discuss on the choice of the appropriate probability levels according to the assumed distribution. The evidence supports that Median Shortfall at 98.31 % and 98.51 % confidence levels as accurate alternatives to Value-at-Risk at 99 % and Expected Shortfall at 97.5 %.
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