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Multiscale Systemic Risk and Its Spillover Effects in the Cryptocurrency Market

Author

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  • Xu Zhang
  • Zhijing Ding
  • Ning Cai

Abstract

Since the advent of Bitcoin, the cryptocurrency market has become an important financial market. However, due to the existence of the cryptocurrency bubble, investors face more difficulties in risk portfolios. We adopt wavelet packet decomposition, nonlinear Granger causality test, risk spillover network, and STVAR model; retain the mature research of multiscale systemic risk based on time and frequency; and thus extend systemic risk to different regimes. We found that when frequency is combined with regimes, the risk spillover center will undergo subversive changes in the long run. We also proposed that BTC will be more robust at extreme values (like longest and shortest periods), while cryptocurrencies with smaller market capitalization will be stronger in the medium term. At the same time, the recession period will also spur on it.

Suggested Citation

  • Xu Zhang & Zhijing Ding & Ning Cai, 2021. "Multiscale Systemic Risk and Its Spillover Effects in the Cryptocurrency Market," Complexity, Hindawi, vol. 2021, pages 1-22, June.
    • Handle: RePEc:hin:complx:5581843
    DOI: 10.1155/2021/5581843
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    Cited by:

    1. Andrei-Dragos Popescu, 2021. "Assessing Portfolio Risks Involving Bitcoin and Ethereum Using Vector Autoregressive Model," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1101-1109, December.
    2. Yang, Ming-Yuan & Wu, Zhen-Guo & Wu, Xin, 2022. "An empirical study of risk diffusion in the cryptocurrency market based on the network analysis," Finance Research Letters, Elsevier, vol. 50(C).
    3. Xu Zhang & Xian Yang & Jianping Li & Jun Hao, 2023. "Contemporaneous and noncontemporaneous idiosyncratic risk spillovers in commodity futures markets: A novel network topology approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(6), pages 705-733, June.

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