Background and Motivation
The cryptocurrency market, characterised by its volatility and complexity, presents unique challenges in risk identification and management. Traditional analytical methods often fail to capture the nuanced risk patterns and rapid price fluctuations inherent in digital assets. In light of recent market turbulence and increased institutional participation, there is an urgent need for more sophisticated tools to dissect and manage cryptocurrency risk at a granular level.
Methodology and Scope
This study introduces a multidimensional risk extraction framework leveraging high-frequency data from nine major cryptocurrencies between December 2020 and July 2024. By employing advanced techniques such as the threshold optimal detection (TOD) model, filter-based trend-cycle decomposition, linear factor regression, and wavelet coherence analysis, the research isolates and examines jump risk, continuous risk, trend risk, and cyclical risk. This multi-pronged approach allows for a precise investigation into both the frequency and sources of risk across different cryptocurrencies and time scales.
Key Findings and Contributions
The research uncovers three major insights:
Why It Matters
As cryptocurrencies gain traction among investors and institutions, robust risk management becomes vital to market stability and investor confidence. By revealing the heterogeneous and multi-layered nature of crypto market risks, this study not only advances academic knowledge but also addresses a pressing industry need for actionable, data-driven risk insights.
Practical Applications
The multidimensional risk analysis framework developed in this research empowers investors, portfolio managers, and risk professionals to:
By offering a deeper, more practical understanding of risk in digital asset markets, this study supports smarter decision-making and paves the way for more robust, informed participation in the fast-evolving world of cryptocurrencies.
Discover high-quality academic insights in finance from this article published in China Finance Review International . Click the DOI below to read the full-text original!
China Finance Review International
News article
Identification of high-frequency volatility and risk prevention in cryptocurrencies
10-Jun-2025