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The relationship between implied volatility and cryptocurrency returns


Akyildirim, Erdinc; Corbet, Shaen; Lucey, Brian; Sensoy, Ahmet; Yarovaya, Larisa (2020). The relationship between implied volatility and cryptocurrency returns. Finance Research Letters, 33:101212.

Abstract

We analyse the relationship between the price volatility of a broad range of cryptocurrencies and that of implied volatility of both United States and European financial markets as measured by the VIX and VSTOXX respectively. Overall, our results indicate the existence of time-varying positive interrelationships between the conditional correlations of cryptocurrencies and financial market stress. Further, these correlations are found to increase substantially during periods of high financial market stress, indicating that the contagion of significant financial market fear influences these new financial products.

Abstract

We analyse the relationship between the price volatility of a broad range of cryptocurrencies and that of implied volatility of both United States and European financial markets as measured by the VIX and VSTOXX respectively. Overall, our results indicate the existence of time-varying positive interrelationships between the conditional correlations of cryptocurrencies and financial market stress. Further, these correlations are found to increase substantially during periods of high financial market stress, indicating that the contagion of significant financial market fear influences these new financial products.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Finance
Language:English
Date:March 2020
Deposited On:03 Feb 2021 08:42
Last Modified:04 Feb 2021 21:00
Publisher:Elsevier
ISSN:1544-6123
OA Status:Closed
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1016/j.frl.2019.06.010
Official URL:https://www.sciencedirect.com/science/article/pii/S1544612319303381
Other Identification Number:merlin-id:20610

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