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Article overview
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Time-Varying Coefficient DAR Model and Stability Measures for Stablecoin Prices: An Application to Tether | | Antoine Djobenou
; Emre Inan
; Joann Jasiak
; | | Date: |
2 Jan 2023 | | Abstract: | This paper examines the dynamics of Tether, the stablecoin with the largest
market capitalization. We show that the distributional and dynamic properties
of Tether/USD rates have been evolving from 2017 to 2021. We use local analysis
methods to detect and describe the local patterns, such as short-lived trends,
time-varying volatility and persistence. To accommodate these patterns, we
consider a time varying parameter Double Autoregressive tvDAR(1) model under
the assumption of local stationarity of Tether/USD rates. We estimate the tvDAR
model non-parametrically and test hypotheses on the functional parameters. In
the application to Tether, the model provides a good fit and reliable
out-of-sample forecasts at short horizons, while being robust to time-varying
persistence and volatility. In addition, the model yields a simple plug-in
measure of stability for Tether and other stablecoins for assessing and
comparing their stability. | | Source: | arXiv, 2301.00509 | | Services: | Forum | Review | PDF | Favorites | |
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