2020
DOI: 10.2139/ssrn.3556854
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Tail Risk Measurement in Crypto-Asset Markets

Abstract: The paper examines the relationships among market assets during stressful times, using two recently proposed econometric modeling techniques for tail risk measurement: the extreme downside hedge (EDH) and the extreme downside correlation (EDC). We extend both measures taking into account the sensitivity of asset's return to innovations not only from the overall market index, but also from its components, by means of network modelling. Applying our proposal to the cryptocurrencies market, we find that crypto-as… Show more

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Cited by 3 publications
(4 citation statements)
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“…As for the rest of the techniques, it does not seem possible to extract definite conclusions about their behavior, bar from the unsuitability of Historical Simulation and linear models. In terms of the traditional VaR Backtesting, FHS and CV deliver somewhat mixed results, with GARCH variants faring slightly better than EGARCH counterparts in FHS category (Columns [3] to [6]) and GARCH-t and EGARCH-t in FHS (Columns [7] to [10]), which appears to signal the relative preeminence of the specification for the FHS and the distributional assumption for CV. Therefore, it would not seem sensible to apply any other model than EVT, as their performance across the board implies 19 .…”
Section: Resultsmentioning
confidence: 99%
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“…As for the rest of the techniques, it does not seem possible to extract definite conclusions about their behavior, bar from the unsuitability of Historical Simulation and linear models. In terms of the traditional VaR Backtesting, FHS and CV deliver somewhat mixed results, with GARCH variants faring slightly better than EGARCH counterparts in FHS category (Columns [3] to [6]) and GARCH-t and EGARCH-t in FHS (Columns [7] to [10]), which appears to signal the relative preeminence of the specification for the FHS and the distributional assumption for CV. Therefore, it would not seem sensible to apply any other model than EVT, as their performance across the board implies 19 .…”
Section: Resultsmentioning
confidence: 99%
“…Table 5.6 depicts the capital levels at the start of the evaluation period. A simple look shows that both specifications do not suffer Backtesting penalties (Table 5.6 Columns [3] to and [13] to [15]), hence their capital values are not in principle deemed to be distorted by those surcharges. Furthermore, the fact that both Spearman and Kolmogorov-Smirnov tests fall into the Green Zone translates in the absence of the surcharge envisaged in ( 17) and ( 18) for both variants (Table 5.6 Columns [6] to [7] and [16] to [17]).…”
Section: Resultsmentioning
confidence: 99%
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