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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.
In dieser Arbeit werden 4,6 Millionen englische Tweets, welche das Keyword „Bitcoin“ enthalten, analysiert und der Zusammenhang zwischen dem Sentiment der Tweets und den Renditen des Bitcoin untersucht. Zur Bestimmung der Sentiment-Klassen werden Text-Klassifizierer mit verschiedenen Ansätzen, darunter auch auf Convolutional Neural Networks und Transformern basierende Modelle, in diesem Kontext evaluiert und optimiert. Es wird außerdem ein Meta-Modell konstruiert, welches beim Problem der Sentiment-Klassifikation von Tweets in drei Klassen {Positiv, Negativ, Neutral} in der betrachteten Domäne besser abschneidet, als die anderen begutachteten Modelle. Bezüglich des Zusammenhangs wird im Speziellen auch der Einfluss von Merkmalen der Tweets und ihrer Verfassern anhand der Distanzkorrelation untersucht.
Financial innovation is, as usual, faster than regulation. New forms of speculation and intermediation are rapidly emerging. Largely as a result of the evaporation of trust in financial intermediation, an exponentially increasing role is being played by the so-called peer to peer intermediation. The most prominent example at the moment is Bitcoin.
If one expects that shocks in these markets could destabilize also traditional financial markets, then it will be necessary to extend regulatory measures also to these innovations.