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2020 | OriginalPaper | Buchkapitel

The Optimal Foreign Exchange Futures Hedge on the Bitcoin Exchange Rate: An Application to the U.S. Dollar and the Euro

verfasst von : Zheng Nan, Taisei Kaizoji

Erschienen in: Advanced Studies of Financial Technologies and Cryptocurrency Markets

Verlag: Springer Singapore

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Abstract

This study proposes utilizing FX futures to hedge the risk of currency exchanges based on the bitcoin exchange rate. The time-dependent optimal hedge ratio for the resulting portfolio can be calculated from the conditional covariance matrix of the two returns. To model the conditional joint density, a VECM plus DCC-GARCH model is suggested due to the existence of co-integration between the bitcoin exchange rate and FX futures. Comparisons suggest that this framework is superior to the commonly used naïve and conventional hedging strategies in several important aspects.

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Vorheriges Kapitel Time Series Analysis of Relationships Among Crypto-asset Exchange Rates

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Titel: The Optimal Foreign Exchange Futures Hedge on the Bitcoin Exchange Rate: An Application to the U.S. Dollar and the Euro
verfasst von: Zheng Nan
Taisei Kaizoji
Verlag: Springer Singapore
Buch: Advanced Studies of Financial Technologies and Cryptocurrency Markets
Print ISBN: 978-981-15-4497-2

Electronic ISBN: 978-981-15-4498-9

Copyright-Jahr: 2020
DOI: https://doi.org/10.1007/978-981-15-4498-9_9