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Digital Library

of the European Council for Modelling and Simulation

 

Title:

Implied volatility based margin calculation on cryptocurrency markets

Authors:

Kata Varadi, Nóra Felföldi-Szűcs, Balázs Králik

Published in:

 

 

(2022). ECMS 2022, 36th Proceedings
Edited by: Ibrahim A. Hameed, Agus Hasan, Saleh Abdel-Afou Alaliyat, European Council for Modelling and Simulation.

 

DOI: http://doi.org/10.7148/2022

ISSN: 2522-2422 (ONLINE)

ISSN: 2522-2414 (PRINT)

ISSN: 2522-2430 (CD-ROM)

 

ISBN: 978-3-937436-77-7
ISBN: 978-3-937436-76-0(CD)

 

Communications of the ECMS , Volume 36, Issue 1, June 2022,

Ålesund, Norway May 30th - June 3rd, 2022

 

Citation format:

Kata Varadi, Nóra Felföldi-Szűcs, Balázs Králik (2022). Implied volatility based margin calculation on cryptocurrency markets, ECMS 2022 Proceedings Edited By: Ibrahim A. Hameed, Agus Hasan, Saleh Abdel-Afou Alaliyat, European Council for Modeling and Simulation.

doi:10.7148/2022-0070

DOI:

https://doi.org/10.7148/2022-0070

Abstract:

The focus of our research is the use of implied volatility in the context of margin calculations on BTC positions. We will compare the standard deviation estimated from historical data to the implied volatility values estimated from ATM option prices. As our main result, we show that the implied volatility is a superior basis for margining purposes. Not only does it perform better in a backtest, it also requires lower average margin levels to provide the same risk profile. Our results also show that the logreturns of BTC cannot be assumed to be normally distributed.<br>.

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