Hungarian University of Agriculture and Life Sciences Researcher Discusses Research in Risk Management (Optimising Portfolio Risk by Involving Crypto Assets in a Volatile Macroeconomic Environment): Insurance – Risk Management

2024 MAY 02 (NewsRx) -- By a News Reporter-Staff News Editor at Insurance Daily News -- Fresh data on risk management are presented in a new report. According to news reporting out of Hungarian University of Agriculture and Life Sciences by NewsRx editors, research stated, “Portfolio diversification is an accepted principle of risk management. When constructing an efficient portfolio, there are a number of asset classes to choose from.”

The news editors obtained a quote from the research from Hungarian University of Agriculture and Life Sciences: “Financial innovation is expanding the range of instruments. In addition to traditional commodities and securities, other instruments have been added. These include cryptocurrencies. In our study, we seek to answer the question of what proportion of cryptocurrencies should be included alongside traditional instruments to optimise portfolio risk. We use VaR risk measures to optimise the process. Diversification opportunities are evaluated under normal return distributions, thick-tailed distributions, and asymmetric distributions. To answer our research questions, we have created a quantitative model in which we analysed the VaR of different portfolios, including crypto-diversified assets, using Monte Carlo simulations. The study database includes exchange rate data for two consecutive years. When selecting the periods under examination, it was important to compare favourable and less favourable periods from a macroeconomic point of view so that the study results can be interpreted as a stress test in addition to observing the diversification effect. The first period under examination is from 1 September 2020 to 31 August 2021, and the second from 1 September 2021 to 31 August 2022.”

According to the news editors, the research concluded: “Our research results ultimately confirm that including cryptoassets can reduce the risk of an investment portfolio. The two time periods examined in the simulation produced very different results. An analysis of the second period suggests that Bitcoin’s diversification ability has become significant in the unfolding market situation due to the Russian-Ukrainian war.”

For more information on this research see: Optimising Portfolio Risk by Involving Crypto Assets in a Volatile Macroeconomic Environment. Risks, 2024,12(4). (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks12040068.

Our news journalists report that additional information may be obtained by contacting Attila Banyai, Doctoral School of Economic and Regional Sciences, Hungarian University of Agriculture and Life Sciences, Pater Karoly Str. 1, H-2100 Godollo, Hungary. Additional authors for this research include Tibor Tatay, Gergo Thalmeiner, Laszlo Pataki.

ORCID is an identifier for authors and includes bibliographic information. The following is ORCID information for the authors of this research: Tibor Tatay (http://orcid.org/0000-0001-5436-4545), Gergo Thalmeiner (http://orcid.org/0000-0002-7224-1028), Laszlo Pataki (http://orcid.org/0000-0003-3093-6988).

(Our reports deliver fact-based news of research and discoveries from around the world.)