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Hedging bitcoin with other financial assets

Author

Listed:
  • Pal, Debdatta
  • Mitra, Subrata K.
Abstract
We compute optimal hedge ratios between bitcoin and other financial assets by using conditional volatility estimates of different GARCH models for a period over January 03, 2011 to February 19, 2018. Gold is found to provide a better hedge against bitcoin. Following generalized orthogonal GARCH, which offers maximum hedging effectiveness, U.S.$1 long of bitcoin could to be hedged with 70 cents short of gold. Our findings are fairly robust to alternate specifications.

Suggested Citation

  • Pal, Debdatta & Mitra, Subrata K., 2019. "Hedging bitcoin with other financial assets," Finance Research Letters, Elsevier, vol. 30(C), pages 30-36.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:30-36
    DOI: 10.1016/j.frl.2019.03.034
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Hedging; Bitcoin; GARCH;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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