A Stochastic Model for Cryptocurrencies in Illiquid Markets with Extreme Conditions and Structural Changes

Youssef El-Khatib; Abdulnasser Hatemi Jarabad

doi:10.1007/978-3-031-35828-9_41

A Stochastic Model for Cryptocurrencies in Illiquid Markets with Extreme Conditions and Structural Changes

Youssef El-Khatib, Abdulnasser Hatemi Jarabad

Department of Mathematical Sciences

Research output: Chapter in Book/Report/Conference proceeding › Chapter

Abstract

Cryptocurrencies are increasingly utilized by investors and financial institutions worldwide. The current paper proposes a prediction model for a cryptocurrency that encompasses three properties observed in the markets for cryptocurrencies—namely high volatility, illiquidity, and regime shifts. By using Ito calculus, we provide a solution for the suggested stochastic differential equation (SDE) along with a proof. Moreover, numerical simulations are performed and are compared to the real data, which seems to capture the dynamics of the price path of a cryptocurrency in the real markets.

Original language	English
Title of host publication	Studies in Systems, Decision and Control
Publisher	Springer Science and Business Media Deutschland GmbH
Pages	479-488
Number of pages	10
DOIs	https://doi.org/10.1007/978-3-031-35828-9_41
Publication status	Published - 2024

Publication series

Name	Studies in Systems, Decision and Control
Volume	487
ISSN (Print)	2198-4182
ISSN (Electronic)	2198-4190

Keywords

Cryptocurrencies
CTMC
High volatility
Illiquid
Regime switching
Stochastic modeling

ASJC Scopus subject areas

Computer Science (miscellaneous)
Control and Systems Engineering
Automotive Engineering
Social Sciences (miscellaneous)
Economics, Econometrics and Finance (miscellaneous)
Control and Optimization
Decision Sciences (miscellaneous)

Access to Document

10.1007/978-3-031-35828-9_41

Cite this

A Stochastic Model for Cryptocurrencies in Illiquid Markets with Extreme Conditions and Structural Changes. / El-Khatib, Youssef ; Hatemi Jarabad, Abdulnasser.
Studies in Systems, Decision and Control. Springer Science and Business Media Deutschland GmbH, 2024. p. 479-488 (Studies in Systems, Decision and Control; Vol. 487).

Research output: Chapter in Book/Report/Conference proceeding › Chapter

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