A Dynamic Market Microstructure Model with Insider Information and Order Book

We provide an extreme value analysis of the returns of Bitcoin. A particular focus is on the tail risk characteristics and we will provide an in-depth univariate extreme value analysis. Those properties will be compared to the traditional exchange rates of the G10 currencies versus the US dollar. For investors - especially institutional ones - an understanding of the risk characteristics is of utmost importance. So for bitcoin to become a mainstream investable asset class, studying these properties is necessary. Our Öndings show that the bitcoin return distribution not only exhibits higher volatility than traditional G10 currencies, but also stronger non-normal characteristics and heavier tails. This has implications for risk management, Önancial engineering (such as bitcoin derivatives) - both from an investorís as well as from a regulatorís point of view. To our knowledge, this is the Örst detailed study looking at the extreme value behaviour of the cryptocurrency Bitcoin.