Analysis of Financial Assets in Colombia: Hedging Positions with Bitcoin
Journal Title: Revista CEA - Year 2023, Vol 9, Issue 21
Abstract
Purpose: This study aims to infer which financial assets in Colombia can be hedged with Bitcoin positions and determine their correlation with that cryptocurrency. In addition, it seeks to improve our understanding of cryptocurrencies (Bitcoin in particular) in order to promote their use and applicability as investment vehicles. Design/methodology: This study used a Dynamic Conditional Correlation (DCC) model, which can capture the dynamic correlations and variability of time series when they are volatile. Furthermore, this model offers the univariate flexibility of the Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) model, which can be used to find moments that make volatility tend to a balance. In this methodology, pairs of variables were evaluated to obtain coefficients that improve the distinction between and interpretation of diversifier, hedge, and safe heaven. Findings: The results show that the coefficients produced by the model can be employed to determine the properties of Bitcoin as a hedging mechanism against some fixed- and variable-income instruments in the Colombian market. They also indicate that Bitcoin should not be used as a safe haven against any of the assets studied here. This gives investors more arguments for decision-making. Conclusions: This study supports the idea that Bitcoin is suitable to be used as an innovative investment product in the Colombian economy because, thanks to its characteristics, it can be employed to build portfolios and hedge against financial risks. Originality: According to the application of this econometric model and the analysis of its outputs, education on digital assets should be promoted. This is because, in the long term, digital assets become solid and profitable, providing an opportunity to generate earnings at an adequate risk level—which is interesting to investors.
Authors and Affiliations
Christian Daniel Escobar Anduquia, Sebastián Darío Avella Jiménez, Brayan Ricardo Rojas Ormaza
Keywords
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- EP ID EP723901
- DOI 10.22430/24223182.2481
- Views 53
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