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Article

Jump Driven Risk Model Performance in Cryptocurrency Market

1
Department of Accounting and Finance, Applied Science University, East Al-Ekir 5055, Bahrain
2
Department of Finance, Bentley University, Waltham, MA 02452, USA
*
Author to whom correspondence should be addressed.
Int. J. Financial Stud. 2020, 8(2), 19; https://0-doi-org.brum.beds.ac.uk/10.3390/ijfs8020019
Received: 26 February 2020 / Revised: 27 March 2020 / Accepted: 27 March 2020 / Published: 1 April 2020
(This article belongs to the Special Issue The Financial Industry 4.0)
This paper aims at identifying a validated risk model for the cryptocurrency market. We propose a stochastic volatility model with co-jumps in return and volatility (SVCJ) to highlight the role of jumps in returns and volatility in affecting Value-at-Risk (VaR) and Expected Shortfall (ES) in cryptocurrency market. Validation results based on backtesting show that SVCJ model is superior in terms of statistical accuracy of VaR and ES estimates, compared to alternative models such as TGARCH (Threshold GARCH) volatility and RiskMetrics models. The results imply that for the cryptocurrency market, the best performing model is a stochastic process that accounts for both jumps in returns and volatility. View Full-Text
Keywords: stochastic volatility with co-jumps; threshold GARCH; RiskMetrics; validation; cryptocurrency market stochastic volatility with co-jumps; threshold GARCH; RiskMetrics; validation; cryptocurrency market
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MDPI and ACS Style

Nekhili, R.; Sultan, J. Jump Driven Risk Model Performance in Cryptocurrency Market. Int. J. Financial Stud. 2020, 8, 19. https://0-doi-org.brum.beds.ac.uk/10.3390/ijfs8020019

AMA Style

Nekhili R, Sultan J. Jump Driven Risk Model Performance in Cryptocurrency Market. International Journal of Financial Studies. 2020; 8(2):19. https://0-doi-org.brum.beds.ac.uk/10.3390/ijfs8020019

Chicago/Turabian Style

Nekhili, Ramzi, and Jahangir Sultan. 2020. "Jump Driven Risk Model Performance in Cryptocurrency Market" International Journal of Financial Studies 8, no. 2: 19. https://0-doi-org.brum.beds.ac.uk/10.3390/ijfs8020019

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