How does convexity risk impact the volatility of digital currencies?

1 answers

• Dec 18, 2021 · 3 years ago
  As an expert in the field, I can confirm that convexity risk does have an impact on the volatility of digital currencies. Convexity risk refers to the potential for the price of a bond or security to change due to changes in interest rates. In the case of digital currencies, convexity risk can affect their volatility by influencing market dynamics and investor sentiment. When interest rates change, it can lead to shifts in investor preferences and risk appetite, which can result in increased buying or selling pressure on digital currencies. This can cause prices to fluctuate more rapidly, leading to higher volatility. Therefore, it is important for investors and traders to consider convexity risk when analyzing the volatility of digital currencies and making investment decisions.
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