CRR seminar examines the risks and benefits of cryptocurrencies
In a recent Centre for Risk Research (CRR) seminar, Professor Wolfgang K. Härdle, the Ladislaus von Bortkiewicz Chair of Statistics at Humboldt-Universität, Berlin, presented the findings from his recent research on topic modelling of cryptocurrency forums.
Cryptocurrencies are more and more used in official cash flows and exchange of goods, and the underlying blockchain technology has been looked at by big companies that are adopting and investing in this technology. The reason for its prosperity is due to the increased security because the underlying network of cryptos is decentralized. However, it is also unregulated and highly volatile, making the risk assessment at any given moment extremely difficult.
Professor Härdle explained that in online message boards one finds a huge source of information in the form of unstructured text written by Bitcoin developers and investors. He explained that in his research he collected texts, user information and associated time stamps from a popular crypto currency message board. He then provided an indicator for fraudulent schemes that was constructed using dynamic topic modelling, text mining and unsupervised machine learning. He studied how opinions and the evolution of topics are connected with big events in the cryptocurrency universe. Furthermore, the predictive power of these techniques were investigated, comparing the results to known events in the cryptocurrency space. He also tested hypothesis of self-fulling prophecies and herding behaviour using the results.
Professor Wolfgang K. Hardle, Humboldt-Universität, Berlin, Wolfgang K. Härdle, has been director of the Ladislaus von Bortkiewicz Chair of Statistics at the Department of Economics and Business Administration at the Humboldt-Universität zu Berlin since 1992. He is Coordinator of the "Collaborative Research Center 649: Economic Risk". Since October 2013 he has also headed the newly established International Research Training Group, a joint project with Xiamen University in China. His research interests are smoothing methods, discrete choice models, statistical modelling of financial markets and computer-aided statistics. His more recent work deals with the modelling of implied volatilities and the statistical analysis of financial risk.