Systemic Risk between Cryptocurrencies and Real Currencies Using the Conditional Value at Risk Approach and Marginal Expected Shortfall

Document Type : Research Paper

Authors

1 Department of Economics, Kish International Campus, University of Tehran, Tehran, Iran.

2 Faculty of Economics, University of Tehran, Tehran, Iran.

Abstract

The objective of this paper is to analyze and measure the systemic risk between cryptocurrencies and real currencies using a value approach in conditional risk exposure and expected marginal shortfall. Systemic risk in finance means the probability of a sudden crash of an entire financial system. This risk can lead to inconsistency or chaos in financial markets. Another important matter in the discussion of systemic risk is the contagion of risk, which is the probability of the spread of major economic changes in a country. In this research, statistical data of real and virtual currencies over the years 2015-2020 are used. For this purpose, the indices of systemic risk were calculated using CoVaR and MES, and then the correlation between the systemic risks of the evaluated currencies was created. In this analysis, the statistical data of the currencies of the exchange rate of the Pound to the Dollar, the exchange rate of the Yuan to the Dollar, the exchange rate of the Lira to the Dollar, the exchange rate of the euro to the Dollar, Bitcoin, Ethereum, Ripple, Litecoin and Ethereum Classic based on the daily price turnover of cryptocurrencies and real currencies are used. The result showed that there was a correlation between the systemic risk indices in relation to the studied currencies and virtual currencies had a lower systemic risk index than real currencies.

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References

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Iranian Economic Review
Volume 27, Issue 3
October 2023
Pages 915-938

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