CHAPTER 11

Risk, Volatility and Correlation in FX and Crypto

Measuring what can go wrong

Opening question

“How risky is crypto compared with currencies and stocks?”

In this chapter

What volatility measures and how to annualise it for markets that never close
Typical volatility of currencies, stocks, gold and crypto-assets
Why volatility comes in clusters and how to track it
Fat tails: why extreme moves happen far more often than the textbook predicts
Drawdowns and the arithmetic of recovery
Correlations with stocks, gold and each other, and why they change in crises
Value at risk and expected shortfall, with a worked example in VND
Stress tests built from real episodes and plausible scenarios

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This chapter is in the full book

Chapter 1 is free to read online. The full text of chapter 11 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Forex and Crypto Investing: From Theory to Practice (Volume 3, NXW Investment Library).

Read Chapter 1 free Get the full book — [email protected]

Sections of this chapter

11.1 Risk is more than one number

11.2 Volatility: measuring and comparing

11.3 Volatility comes in clusters

11.4 Fat tails: extreme moves happen more often

11.5 Drawdowns: the loss you actually live through

11.6 Correlation: with stocks, gold and each other

11.7 How much risk does a small crypto position add?

11.8 Value at risk and expected shortfall

11.9 Stress tests: thinking in scenarios

11.10 Risk seen from Vietnam

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