Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/169204
Authors: 
Trimborn, Simon
Li, Mingyang
Härdle, Wolfgang
Year of Publication: 
2017
Series/Report no.: 
SFB 649 Discussion Paper 2017-014
Abstract: 
Cryptocurrencies have left the dark side of the finance universe and become an object of study for asset and portfolio management. Since they have a low liquidity compared to traditional assets, one needs to take into account liquidity issues when one puts them into the same portfolio. We propose use a Liquidity Bounded Risk-return Optimization (LIBRO) approach, which is a combination of the Markowitz framework under the liquidity constraints. The results show that cryptocurrencies add value to a portfolio and the optimization approach is even able to increase the return of a portfolio and lower the volatility risk.
Subjects: 
crypto-currency
CRIX
portfolio investment
asset classes
blockchain
JEL: 
C01
C58
G11
Document Type: 
Working Paper

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