Bitcoin Volatility Estimate Applying Rogers and Satchell Range Model

Eloisa Cadenas-Morales, Edgar Ortiz
International Journal of Finance, Insurance and Risk Management, Volume 12, Issue 1, 49-79, 2022
DOI: 10.35808/ijfirm/278


Purpose: The objectives of this paper are, first, to synthesize the main events that have influenced the development and volatility of bitcoin, and second to present and apply the Rogers and Satchell range model (1993) for the measurement of bitcoin volatility. Desigh/methodology/Approach: Findings: The results are useful for risk management, searching profitable investments, diversification of portfolios, and the application of a reliable risk parameter for the valuation of bitcoin financial and real options. The evidence suggests further studies extending it, considering leptokurtosis and other moments of the distribution of the series. Practical implications: Finally, the study highlights the need for clear regulations on bitcoin and other cryptocurrencies to ensure a fruitful future co-existence with digital currencies created by the central banks. The work suggests the creation of additional IMF’s Special Drawing Rights in lieu of a global cryptocurrency. That would help to overcome the problems created by the Covid-19 pandemic and member countries would retain their monetary sovereignty. Originality value: These objectives underline the originality and contribution of the work. This is the first time this model is fully recognized and used, highlighting its advantages.

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