A Critical Analysis of Volatility Surprise in Bitcoin Cryptocurrency and Other Financial Assets

The purpose of this paper is to investigate the viability as compared with other financial assets of cryptocurrencies as a currency or as an asset investment. This paper also aims to see which macro variable relates more to the price of cryptocurrencies, especially Bitcoin. Since the whole concept of cryptocurrencies is quite novel, an attempt has been made to briefly explain the underlying blockchain technology that forms the bedrock of cryptocurrencies. In this study, we use secondary data, i.e., the price history of Bitcoin from September 2014 to September 2021 for the last seven years, captured from trading exchanges. We predicted monthly returns of Bitcoin with that of Standard & Poor’s 500 Index (S&P 500), gold, and Treasury Bonds. Our findings show that Bitcoin has very high volatility compared to S&P 500, Gold and Treasury Bonds. Also, our findings show that there is a positive correlation between Bitcoin’s price volatility and the other three financial assets before and during COVID-19. Hence, Bitcoin is acting more as a speculative asset rather than a steady store of value. This can be drawn from the comparison with the debt market i.e., a Treasury Bond that invests in long-dated (30 years) US treasuries with which Bitcoin shows no relationship. The findings of this study could help with understanding the future of Bitcoin. This has important implications for Bitcoin investors. The current study contributes to the extant literature by providing empirical evidence on long-term social sustainability vis-à-vis supply chain traceability.

ASSESSMENT OF THE SUSTAINABILITY OF THE ECONOMY OF KAZAKHSTAN TO THE CONSEQUENCES OF THE CORONACRISIS

В статье раскрыта степень устойчивости экономики Казахстана к последствиям коронакризиса. В частности, рассмотрено влияние нефтяных цен на темпы роста ВВП и достаточность денежных резервов, хранящихся в Национальном Фонде, для поддержания национальной экономики в случае длительного сохранения низких цен на нефть. Для построения более целостной модели использовались также данные по внешнеторговому обороту страны и притоку прямых иностранных инвестиций. Автором проанализированы тенденции развития мировой экономики в период пандемии коронавируса. Выявлены предпосылки возможной рецессии стран, в основу которой заложена возникшая инверсия доходностей двухлетних и десятилетних казначейских облигаций США. Анализируя вопрос инверсии доходности установлено, что ее причиной стали спад финансовых рынков, обесценивание нефти и снижение деловой активности по всему миру, которые вынудили участников рынка перевести средства в 10-летние трежерис. Относительно Казахстана в статье проанализированы экономические последствия коронакризиса, а также изучена степень зависимости экономики от нефтяных цен. Отмечено, что переход к диверсифицированной экономике становится для Казахстана особенно актуальным и приоритетным в условиях волатильности цен на нефть. The article reveals the degree of stability of the economy of Kazakhstan to the consequences of the coronavirus crisis. In particular, the impact of oil prices on GDP growth rates and the adequacy of the monetary reserves stored in the National Fund to support the national economy in the event of long-term persistence of low oil prices are considered. To build a more holistic model, data on the country's foreign trade turnover and the inflow of foreign direct investment were also used. The authors analyzed the development trends of the world economy during the coronavirus pandemic. The prerequisites for a possible recession of countries are identified, which is based on the emerging inversion of the yields of two-year and ten-year US Treasury bonds. Analyzing the issue of income inversion, it was found that it was caused by the recession in financial markets, the depreciation of oil and the decline in business activity around the world, which forced market participants to transfer funds to 10-year Treasuries. With regard to Kazakhstan, the article analyzes the economic consequences of the coronavirus crisis, and also studies the degree of dependence of the economy on oil prices. It was noted that the transition to a diversified economy is becoming especially relevant and priority for Kazakhstan in the context of volatility in oil prices.

The Interdependence of FX and Treasury Bonds Markets: The Case of Colombia

We study the interdependence of FX and Treasury Bonds (TES) markets in Colombia. To do this, we estimate a heteroskedasticity identified VAR model on the returns of the COP/USD exchange rate (TRM) and bond prices, as well as event-analysis models for return volatilities, number of quotes, quote volume, and bid/ask spreads. The data under analysis consists of 5-minute intraday bid/ask US dollar prices and bond quotes, for an assortment of bond species. For these species we also have the number of bid/ask quotes as well as their volume. We found, also, that the exchange rate conveys information to the TES market, but the opposite does not completely hold: A one percent COP depreciation leads to a persistent reduction of TES prices between 0.05% and 0.22%. However, a 1% TES price increase has a very small effect and not entirely significant on the exchange rate, i.e. a COP appreciation between 0.001% and 0.009%. Furthermore, TRM return volatility increases do not affect bond return volatility but its liquidity, i.e. the bid/ask quote number and volume. These results are coherent with the fact that the FX market more efficiently reflects the effect of shocks than the TES market, which may be due to its low liquidity and concentration on a specific habitat. These results have implications for the design of financial stability policies as well as for private portfolio design, rebalancing and hedging.

Safe-haven assets for U.S. equities during the 2020 COVID-19 bear market

The recent stock market downturn is differentiated from the previous ones as it is due to an economic, rather than a financial occurrence (the COVID-19 Pandemic). The purpose of our study is to examine gold, bitcoin, and U.S. Treasury bonds as a safe haven during the COVID-19 bear market. Unlike many studies that support gold as a traditional safe haven for stocks, our study finds that bitcoin and Treasury bonds perform better as a safe haven than gold during the recent COVID-19 bear market.

BETTER SAFE HAVENS DURING COVID-19: A COMPARISON BETWEEN ISLAMIC AND SELECTED FINANCIAL ASSETS

This study examines the safe haven properties of six assets (the S&P Technology Index, S&P GSCI Commodity Index, bitcoin, the Dow Jones Islamic Equity Index, the Dow Jones Global Sukuk Index and US Treasury bonds) during contiguous infectious diseases, employing the equity index returns of three regional markets (S&P500,S&P Europe, and S&P Asia-Pacific) over the period 2010 - 2020 Q2. In the research, information-rich methodological tools such as the Markov switching approach and the DCC-GARCH model are used. Our results suggest that Sukuk and bonds act as safe havens for different types of investors during the ongoing COVID-19 crisis. This property is, however, is not confirmed for the S&P Technology Index, Commodity Index, bitcoin or the DJ Islamic Equity Index. Moreover, using the time-varying VAR model and the new measure of pandemic uncertainty proposed by Baker et al. (2020), the results demonstrate that the COVID-19 pandemic has led to uncertainty and heightened volatility spillovers among regional equities and the safe haven assets examined. The key results of the study are robust and useful for portfolio managers and investors.

Ghana borrowings may prompt eventual return to the IMF

Significance The Bank of Ghana (BoG) has bought up unprecedented levels of treasury bonds but now wants to scale back its role. Finance Minister Ken Ofori-Atta is looking to international capital markets to plug the gap, once he returns from medical leave abroad, but fixed-income investors are urging Ghana to enter a new IMF programme. Impacts Ghana's predicament will undermine the African growth narrative, hitting yields on Eurobonds issued by its peers. Ofori-Atta's absence will raise fears of his incapacitation and the damage that would cause to a finance ministry shaped in his image. Rising inflation is likely to go unchecked until BoG Governor Ernest Addison starts his second term in April.

A Study on the Financing Effect of U.S. Debt from the Perspective of Modern Monetary Theory-Also on the Innovation Driving Effect of Monetary Sovereignty

The traditional view is that China uses the foreign exchange income earned from the trade surplus to purchase U.S. treasury bonds, which provides financing for U.S. government expenditures and maintains the sustainability of U.S. public debt. Based on the modern monetary theory, this paper analyzes this phenomenon and believes that China’s trade surplus cannot finance US government expenditures. U.S. debt issuance can exert interest rate stabilization effect, exchange rate stabilization effect, currency issuance effect and innovation “crowding-out” effect, but it has no financing effect. Therefore, this paper puts forward some policy suggestions, such as increasing the central government expenditure and the issuance of treasury bonds, and implementing the reform of floating exchange rate system, in order to increase the monetary sovereignty of our country and give full play to the government’s role in promoting domestic economic innovation.

MODERN METHODS OF THE BANK`S INVESTMENT DEVELOPMENT BASED ON THE PAIR TRADING MODELS

The article deals with the problem of analysis of banking activity and modern methods of investment development of the bank based on pairs trading models. The essence of the pair trading method as one of the most popular and qualitative methods of investment paper quality analysis is disclosed. The basis of the pairing trading method is defined as the beta-neutral portfolio strategy, which consists of creating a portfolio with a beta coefficient equal to zero, and the main advantage of which is the complete independence of the final paper yield from the market yield, it is only dependent on the future ratio of the value of one security to another. For the successful introduction of this method in banking activity, a clear algorithm for the construction of a paired trading model based on economic-mathematical methods and models is proposed. The proposed algorithm contains three stages in which the following steps are to be taken: analysis and selection of securities; development of a pairing trading model; development and regulation of the selected strategy. The implementation of the proposed algorithm begins with the selection of statistical data on the prices of securities, provides for the verification of data on stationarity, as well as the identification of a system for combining series, and the analysis of coefficients of the matching between prices of securities. As a result of the steps taken, pairs of securities are selected that are more closely related and a full economic analysis of the pairs is made, and the parameters of co-integration equations to pairs of paper are selected, evaluated and analyzed then the errors of the co-integration model are checked for stationary. In the work models of pairs trading are constructed for the realization of an aggressive strategy of trade spreads. In order to build an effective strategy for pairing trading, data on prices of securities, which are the most attractive to Ukrainian banks, namely, US Treasury bonds, have been examined. The hypothesis being tested in the paper is that it is necessary to identify a pair of securities with a sufficiently strong dependency where one should have a rapid growth or decline relative to the other, after which the sale of the revalued security and the purchase of the undervalued security is mandatory. The study found that for each pair of Treasury bonds, the ratio was satisfactory. This indicates that the resultant securities pairs are suitable as an investment that, with a well-designed strategy, will allow the bank to obtain optimum returns. The final step of the algorithm is the analysis of the results obtained, which includes a comprehensive analysis of the conducted research and effective decision-making. The application of the proposed algorithm will allow banks to make informed decisions on the choice and regulation of the strategy in exchange market changes in order to obtain a low level of risk and a high level of profit.