The Generalised Extreme Value Distribution Approach to Comparing the Riskiness of BitCoin/US Dollar and South African Rand/US Dollar Returns

In this paper, the generalised extreme value distribution (GEVD) model is employed to estimate financial risk in form of return levels and at (VaR) for two exchange rates, BitCoin/US dollar (BTC/USD) South African rand/US (ZAR/USD). The Basel Committee on Banking Supervision (BCBS) responsible developing supervisory guidelines banks trading desks recommended that VaR be computed reported. maximum likelihood estimation (MLE) method used parameters GEVD. estimated values are compare riskiness rates help both traders investors define their position forex trading. This helping understanding they taking when convert savings/investments BitCoin instead currency, rand. high index associated with BTC/USD compared ZAR/USD implies riskier than has higher expected extreme/tail losses 13.44%, 18.02%, 23.41% short (6 months), medium (12 long (24 months) terms, 2.40%, 2.84%, 3.28%, respectively. estimates USD 0.17, 0.22, 0.38 per invested 90%, 95%, 99%, ZAR/USD’s 0.03, 0.04 respective confidence levels, confirm BitCoin. conclusion drawn from study ZAR/USD, despite rand being a country’s hence perceived as risky. perception perceptions do influence rates. Kupiec’s backtest results confirmed model’s adequacy. These findings helpful investors, traders, managers deciding positions currencies.