| dc.description.abstract | With the digitization in the world becoming almost a necessity, the wake of Bitcoin (BTC) made headlines around the world. A new and emerging technological
advancement like cryptocurrency and blockchain results in volatile investments.
This thesis was written in order to see if the volatile tails of crypto assets justified
an extreme value analysis and to evaluate the assets from a tail risk perspective.
The thesis will check if an EVA is justified by looking at the volatility and normal
distribution fits. Once the EVA is justified, the paper will take a further look into
the Generalized Pareto distribution (GPD) fit and the Generalized Extreme Value
(GEVD) fit to evaluate how accurate they are compared to the real life samples.
Lastly, an estimation of value-at-risk (VaR) and expected shortfall (ES) will be
calculated. Throughout the dissertation, the calculations will be performed on
the NOK/USD exchange to compare the crypto market to FIAT currencies. The
paper also aims to state a few future plans and price drivers for the assets to see
how external factors affect the price.
The results from the research and calculations show major risk in the crypto assets compared to the FIAT currency chosen. The EVA exhibits that the GP and
GEV fits are both much more accurate, and therefore it was concluded that the
analysis was successful. The VaR and ES results show how much risk these assets
carry, with the ES being the more optimal risk measure for crypto assets. | |
