Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/274826 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 7 [Article No.:] 304 [Year:] 2022 [Pages:] 1-34
Publisher: 
MDPI, Basel
Abstract: 
This paper examined a set of over two thousand crypto-coins observed between 2015 and 2020 to estimate their credit risk by computing their probability of death. We employed different definitions of dead coins, ranging from academic literature to professional practice; alternative forecasting models, ranging from credit scoring models to machine learning and time-series-based models; and different forecasting horizons. We found that the choice of the coin-death definition affected the set of the best forecasting models to compute the probability of death. However, this choice was not critical, and the best models turned out to be the same in most cases. In general, we found that the cauchit and the zero-price-probability (ZPP) based on the random walk or the Markov Switching-GARCH(1,1) were the best models for newly established coins, whereas credit-scoring models and machine-learning methods using lagged trading volumes and online searches were better choices for older coins. These results also held after a set of robustness checks that considered different time samples and the coins' market capitalization.
Subjects: 
bitcoin
cauchit
credit risk
crypto-assets
crypto-currencies
default probability
google trends
logit
probability of death
probit
random forests
ZPP
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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