TY  - JOUR
A1  - Wöbbeking, Carl Fabian
T1  - Cryptocurrency volatility markets
T2  - Digital finance
N2  - By computing a volatility index (CVX) from cryptocurrency option prices, we analyze this market’s expectation of future volatility. Our method addresses the challenging liquidity environment of this young asset class and allows us to extract stable market implied volatilities. Two alternative methods are considered to compute volatilities from granular intra-day cryptocurrency options data, which spans over the COVID-19 pandemic period. CVX data therefore capture ‘normal’ market dynamics as well as distress and recovery periods. The methods yield two cointegrated index series, where the corresponding error correction model can be used as an indicator for market implied tail-risk. Comparing our CVX to existing volatility benchmarks for traditional asset classes, such as VIX (equity) or GVX (gold), confirms that cryptocurrency volatility dynamics are often disconnected from traditional markets, yet, share common shocks.
KW  - Cryptocurrency
KW  - Blockchain
KW  - Bitcoin
KW  - Volatility
KW  - Derivatives
KW  - Options
KW  - Liquidity
Y1  - 2021
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/81339
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-813390
SN  - 2524-6186
N1  - Open Access funding enabled and organized by Projekt DEAL.
VL  - 3
IS  - 3
SP  - 273
EP  - 298
PB  - Springer Nature Switzerland AG
CY  - [Cham]
ER  -