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Erschienen in:
2023 | OriginalPaper | Buchkapitel
14. Financial Risk Management
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Abstract
Similar to non-financial risk, financial risk is higher for cryptoassets than traditional investments. For example, as introduced in Chapter 4, the most traditional measure of financial risk is volatility, expressed as the standard deviation of returns. Downward volatility is another helpful metric used as an input to compute the Sortino ratio, which was introduced in the same chapter. Both metrics indicate risk levels much higher for cryptoassets than stocks, for instance. These increased risks are only acceptable for investors because the level of expected return is correspondingly higher for cryptoassets. In any case, other metrics are necessary to fully understand the risk profile of cryptoassets; where possible, forward-looking metrics are especially beneficial.