On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier?

Bouri, Elie; Molnár, Péter; Azzi, Georges; Roubaud, David; Hagfors, Lars Ivar

doi:10.1016/j.frl.2016.09.025

Cited by 996 publications

(603 citation statements)

References 16 publications

(26 reference statements)

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“…However, the literature on the finance and economics of Bitcoin remains understudied, despite the empirical examination of price formation, price dynamics, hedging ability, and market efficiency of Bitcoin. Bouri, Gupta, Tiwari, and Roubaud (2017) and Bouri, Molnár, Azzi, Roubaud, and Hagfors (2017) argue that Bitcoin is part of an alternative "peerto-peer" economy. Cohen (2017) considers Bitcoin as a basic form of movement against capitalism, free trade, and globalization.…”

Section: Literature Reviewmentioning

confidence: 99%

Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

et al. 2018

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Motivated by the emergence of Bitcoin as a speculative financial investment, the purpose of this paper is to examine the persistence in the level and volatility of Bitcoin price, accounting for the impact of structural breaks. Using parametric and semiparametric techniques, we find strong evidence in favour of a permanency of the shocks and lack of mean reversion in the level series. We also reveal evidence of structural changes in the dynamics of Bitcoin. After accounting for the structural breaks in the level series, evidence of mean reversion is uncovered in some cases. Further analyses show evidence of a long memory in the two measures of volatility (absolute and the squared returns), whereas some cases of short memory are revealed in the squared returns series in particular. Practical implications are discussed on the inefficiency in the Bitcoin market and its importance for Bitcoin users and investors.

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Section: Literature Reviewmentioning

confidence: 99%

Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

et al. 2018

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“…Bariviera (2017) also finds high persistence in daily variance, which makes GARCH models suitable for variance modelization. Bouri et al (2017) use a dynamic conditional correlation model in order to study the potential use of bitcoin as a safe-haven asset. Their main findings are that bitcoin is acts as a poor hedge, but it is suitable for diversification purposes.…”

Section: Data and Resultsmentioning

confidence: 99%

A bibliometric analysis of bitcoin scientific production

Merediz-Solà

Bariviera

2019

Research in International Business and Finance

137

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Blockchain technology, and more specifically Bitcoin (one of its foremost applications), have been receiving increasing attention in the scientific community. The first publications with Bitcoin as a topic, can be traced back to 2012. In spite of this short time span, the production magnitude (1162 papers) makes it necessary to make a bibliometric study in order to observe research clusters, emerging topics, and leading scholars. Our paper is aimed at studying the scientific production only around bitcoin, excluding other blockchain applications. Thus, we restricted our search to papers indexed in the Web of Science Core Collection, whose topic is "bitcoin". This database is suitable for such diverse disciplines such as economics, engineering, mathematics, and computer science. This bibliometric study draws the landscape of the current state and trends of Bitcoin-related research in different scientific disciplines.

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“…Bouri et al [14] find that Bitcoin can act as a hedge against market uncertainty in situations, specifically in short time horizons under extreme bear or bull market regimes, or when uncertainty is either very low or very high. Bouri et al [15] overall minimizes the usefulness of Bitcoin as a general hedge, but still finds evidence that investors put money into Bitcoin when Asian stocks experience extreme down movements.…”

Section: Application To Cryptocurrenciesmentioning

confidence: 99%

The Amnesiac Lookback Option: Selectively Monitored Lookback Options and Cryptocurrencies

Chang

2018

Front. Appl. Math. Stat.

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This study proposes a strategy to make the lookback option cheaper and more practical, and suggests the use of its properties to reduce risk exposure in cryptocurrency markets through blockchain enforced smart contracts and correct for informational inefficiencies surrounding prices and volatility. This paper generalizes partial, discretely-monitored lookback options that dilute premiums by selecting a subset of specified periods to determine payoff, which we call amnesiac lookback options. Prior literature on discretely-monitored lookback options considers the number of periods and assumes equidistant lookback periods in pricing partial lookback options. This study by contrast considers random sampling of lookback periods and compares resulting payoff of the call, put and spread options under floating and fixed strikes. Amnesiac lookbacks are priced with Monte Carlo simulations of Gaussian random walks under equidistant and random periods. Results are compared to analytic and binomial pricing models for the same derivatives. Simulations show diminishing marginal increases to the fair price as the number of selected periods is increased. The returns correspond to a Hill curve whose parameters are set by interest rate and volatility. We demonstrate over-pricing under equidistant monitoring assumptions with error increasing as the lookback periods decrease. An example of a direct implication for event trading is when shock is forecasted but its timing uncertain, equidistant sampling produces a lower error on the true maximum than random choice. We conclude that the instrument provides an ideal space for investors to balance their risk, and as a prime candidate to hedge extreme volatility. We discuss the application of the amnesiac lookback option and path-dependent options to cryptocurrencies and blockchain commodities in the context of smart contracts.

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On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier?

Cited by 996 publications

References 16 publications

Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

A bibliometric analysis of bitcoin scientific production

The Amnesiac Lookback Option: Selectively Monitored Lookback Options and Cryptocurrencies

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