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Ren, Rui
Althof, Michael
Härdle, Wolfgang Karl
Year of Publication: 
Series/Report no.: 
IRTG 1792 Discussion Paper No. 2020-028
Cryptocurrencies are gaining momentum in investor attention, are about to become a new asset class, and may provide a hedging alternative against the risk of devaluation of fiat currencies following the COVID-19 crisis. In order to provide a thorough understanding of this new asset class, risk indicators need to consider tail risk behaviour and the interdependencies between the cryptocurrencies not only for risk management but also for portfolio optimization. The tail risk network analysis framework proposed in the paper is able to identify individual risk characteristics and capture spillover effect in a network topology. Finally we construct tail event sensitive portfolios and consequently test the performance during an unforeseen COVID-19 pandemic.
Network Dynamics
Portfolio Optimization
Quantile Regression
Systemic Risk
Financial Risk Meter
Document Type: 
Working Paper

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