Forecasting Bitcoin Volatility Using Hybrid GARCH Models with Machine Learning

【Author】 Zahid, Mamoona; Iqbal, Farhat; Koutmos, Dimitrios

【Source】RISKS

【影响因子】0.000

【Abstract】The time series movements of Bitcoin prices are commonly characterized as highly nonlinear and volatile in nature across economic periods, when compared to the characteristics of traditional asset classes, such as equities and commodities. From a risk management perspective, such behaviors pose challenges, given the difficulty in quantifying and modeling Bitcoin's price volatility. In this study, we propose hybrid analytical techniques that combine the strengths of the non-stationary properties of Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models with the nonlinear modeling capabilities of deep learning algorithms, such as Long Short-Term Memory (LSTM), Gated Recurrent Unit (GRU), and Bidirectional LSTM (BiLSTM) algorithms with single, double, and triple layer network architectures to forecast Bitcoin's realized price volatility. Our findings, both in-sample and out-of-sample, show that such hybrid models can generate accurate forecasts of Bitcoin's price volatility.

【Keywords】volatility; Bitcoin; machine learning; GARCH; recurrent neural networks

【发表时间】2022 DEC

【收录时间】2023-01-18

【文献类型】理论模型

【主题类别】

区块链治理-市场治理-数字货币