Original scientific paper
https://doi.org/10.18045/zbefri.2022.2.297
Crypto portfolio optimization through lens of tail risk and variance measures
Bojan Tomić
orcid.org/0000-0002-2305-2845
; Effectus University, College for Law and Finance, Faculty, Zagreb, Croatia.
Saša Žiković
Lorena Jovanović
Abstract
The choice of an adequate risk measure in portfolio optimization depends to a
large extent on the characteristics and dynamics of the underlying assets. For
investors and asset managers, a range of potential market risks provides much-
needed insights into the optimization of their portfolio of assets. Since this paper
focuses on multiple risk measures, it presents the investors with a better insight
into the potential magnitude of the risk they are faced with. Since the risk-reward
optimization target can be adjusted for a broad choice of risk measures in this
paper we will test the performance of the classical risk measure i.e. standard
deviation versus a tail risk measure such as expected tail loss (ETL). Our goal is to
find which of the two offers the better performance for a portfolio of
cryptocurrencies and if the differences are statistically significant. The setup for
our analysis is testing two optimization targets (MinVar and MinETL) on 10
portfolios of cryptocurrencies randomly chosen from a sample of 70
cryptocurrencies with the highest market capitalization.
Keywords
portfolio optimization; cryptocurrency; risk evaluation; investments
Hrčak ID:
289638
URI
Publication date:
30.12.2022.
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