Humboldt-Universität zu Berlin - High Dimensional Nonstationary Time Series

SFB649DP2015 048

CRIX or evaluating Blockchain based currencies

Simon Trimborn
Wolfgang Karl Härdle

The S&P500 or DAX30 are important benchmarks for the financial industry. These and other
indices describe different compositions of certain segments of the financial markets. For
currency markets, the IMF offers the index SDR. Prior to the Euro, the ECU existed, which
was an index representing the development of European currencies. It is surprising,
though, to see that the common index providers have not mapped emerging e-coins into an
index yet because with cryptos like Bitcoin, a new kind of asset of great public interest
has arisen. Index providers decide on a fixed number of index constituents which will
represent the market segment. It is a huge challenge to set this fixed number and develop
the rules to find the constituents, especially since markets change and this has to be
taken into account. A method relying on the AIC is proposed to quickly react to market
changes and therefore enable us to create an index, referred to as CRIX, for the
cryptocurrency market.

Index construction, CRIX, risk analysis, bitcoin, cryptocurrency

JEL Classification:
C51, C52, G10