Optimizations given historical data unsurprisingly produce sizeable allocations to Bitcoin (XBT). But further analyses of risks raise questions, even abstracting from expected returns. GARCH-based measures of dynamic XBT volatility and covariance suggest optimal weights change over time. Also,...

This study investigates the relationship between expected returns on cryptocurrencies and macroeconomic fundamentals. We employ a dynamic factor model and summarize information as common factors. We find that the common factors are strongly linked to the cryptocurrency expected returns at a...

Digital currencies are gaining more and more attention against the backdrop of recent events triggered by the ongoing economic crisis. While digital currencies face increasing popularity, the currencies' prices are free floating and subject to high volatility as a result of lacking fundamental...

By computing a volatility index (CVX) from cryptocurrency option prices, we analyze the market's expectation of future volatility. Our method addresses the challenging liquidity environment of this young asset class and allows us to extract stable market implied volatilities. Two alternative...