Modeling Volatility with GARCH models : an Application on Bitcoin, Ethereum and Ripple

Abstract

There is a growing awareness in the financial markets, financial institutions, investors and researches for the cryptocurrencies in last few years. In parallel with this awareness and interest, highly volatile structure of the cryptocurrencies leads investors and institutions to provide some models to analyze and predict the volatility. The purpose of this study is to shed light on potential scenarios regarding the future of Bitcoin, Ethereum and Ripple by using GARCH model. In addition to this, results will be compared according to their performance in order to determine which model is the most successful in volatility modeling. Thus, it will be possible to comment on the volatility structure of cryptocurrencies, improve the financial tools used in the market and contribute to the literature by trying to guide future studies of cryptocurrencies.