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Bitcoin Price Risk—A Durations Perspective

School of Business and Economics, University of Tübingen, Sigwartstr. 18, 72076 Tübingen, Germany
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J. Risk Financial Manag. 2020, 13(7), 157; https://doi.org/10.3390/jrfm13070157
Received: 3 July 2020 / Revised: 14 July 2020 / Accepted: 15 July 2020 / Published: 17 July 2020
(This article belongs to the Special Issue Bitcoin: Past, Present, and Future)
An important aspect of liquidity is price risk, i.e., the risk that a small transaction leads to a large price change. This usually happens in a thin market, when trading opportunities are scarce and the time between subsequent trades is long. We rely on an autoregressive conditional duration model to extract the probability of a substantial price event in a particular time interval and, thus, an intraday risk profile. Our findings show that price risk is highest at times when European and U.S. investors do not trade. In a second step, we relate daily aggregates to characteristics of the Bitcoin blockchain and investigate whether investors account for features like confirmation time or fees when timing their orders. View Full-Text
Keywords: bitcoin; duration; risk; microstructure bitcoin; duration; risk; microstructure
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Dimpfl, T.; Odelli, S. Bitcoin Price Risk—A Durations Perspective. J. Risk Financial Manag. 2020, 13, 157.

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