Available Master thesis topics
Bitcoin-Altcoin Pair Trading
The thesis should first replicate and update González et al. (2020; González, María de la O., Francisco Jareño, and Frank S. Skinner. "Nonlinear Autoregressive Distributed Lag Approach: An Application on the Connectedness between Bitcoin Returns and the Other Ten Most Relevant Cryptocurrency Returns." Mathematics 8.5 (2020)). A second part of the thesis should be devoted to Bitcoin-Altcoin pair trading analysis, i.e., whether an investor could use lagged Bitcoin returns to forecast Altcoin returns (or vice versa). Please contact Andre Guettler if you are interested.
Crypto assets premia prediction
The thesis should conduct crypto assets premia prediction, i.e., how well can we predict Bitcoin prices (appart from Daddy Elon's tweets..;-). Appart from traditional predictors used for equity premia (e.g., Welch and Goyal, 2008), crypto-specific predictors such as hash-rate, electricity prices, measures of crypto-regulation, number of Bitcoin-wallets, Google search terms etc should be used. For instance, these data can be obtained via Glassnode. Please contact Andre Guettler if you are interested.
Can we hedge inflation risk by holding Bitcoin? (reserved)
The thesis should analyze whether Bitcoin (and other major crypto currencies) could serve as a natural hedge for inflation risk. Foremost sensitivity of traditional assets such as stocks, bonds, real estate, and gold with respect to interest rate changes should be compared with Bitcoin. Please contact Andre Guettler if you are interested.
How much crypto assets should be in your portfolio?
The thesis should analyze how much crypto asssets should be in your portfolio. Based on Platanakis and Urquhart (2019) and the papers cited in this publication, you should use the Black-Litterman Model to come up with suitable crypto portfolio weights. Please contact Andre Guettler if you are interested.
The thesis is about on-chain analysis, which is offered by CoinMetrics or Glassnode (see some examples here). To start with, you should first make yourself familiar with the data using from publicly available sources (e.g., a simple example using R given here). In the next step, you should replicate and enhance/modify key on-chain indicators running your own bitcoin node (here you find relevant information). Note: this thesis is offered to crypto enthusiasts with proficient knowledge in (Python) programming and blockchain analysis. Please contact Andre Guettler if you are interested.
The thesis should calculate betas for liquid crypto assets (excluding stable coins). For that purpose, a database with daily crypto assets price data should be obtained. In the next step, a crypto index should be calculated (e.g., based on the top 100 non-stable coins). Finally, the betas are calculated and analysed. Further factors such as size, age, and category should be analyzed. Please contact Andre Guettler if you are interested.
Asset management and asset pricing:
Thematic Investments and Optimized Portfolios
The world of thematic investing provides investors an opportunity to participate in specific investment themes. These can be based on very promising trends, but at the same time may be exposed to higher risks in comparison with a broad diversified portfolio. Theory tells us that the overall asset allocation and efficient portfolio construction ("top down") is more important than the selection of single investment vehicles ("bottom up"). Based on theory as well as historical performance data, this Master thesis explores efficient ways to incorporate thematic investments into an optimized portfolio. This thesis will be jointly supervised by our institute and an industry partner (Solactive). Note that this topic requires visits to Frankfurt in order to cooperate with the industry partner. Please contact Andre Guettler if you are interested.
Has Passive Investing shifted US Equity Market Dynamics?
Passive investment strategies focus on tracking a particular index or portfolio. 2019 represented the first point in time in which the assets under management of funds that track U.S. equity indexes surpassed those of actively managed funds. The goal of this thesis is to analyze how the rise of passive investments has influenced the US equity market. For example, how the correlation or reaction to unexpected market shocks of US based index’ constituents may have changed. Please read "The implications of passive investing for securities markets" (Sushko and Turner, 2018) for the general idea. This thesis will be jointly supervised by our institute and an industry partner (Solactive). Note that this topic requires visits to Frankfurt in order to cooperate with the industry partner. Please contact Andre Guettler if you are interested.
Evaluating Credit Risk for Corporate Issuers
Credit risk estimation is one of the core tasks within the management of corporate bond portfolios. There are various methods to score companies according to their credit risk. The goal of this thesis is to compare a classical statistical model to a machine learning model. The comparison should be done against a benchmark (based on data from rating agencies). In a further step, both models should be implemented in an index to analyze their risk adjusted past returns. This thesis will be jointly supervised by our institute and an industry partner (Solactive). Note that this topic requires visits to Frankfurt in order to cooperate with the industry partner. Please contact Andre Guettler if you are interested.
GME on XTC (reserved)
Case study about the recent short squezze in GameStop (GME). Proven stock-market / derivatives nerds only! Please contact Andre Guettler if you are interested.
We also supervise replication exercises of published papers in the area of forecasting asset prices. The thesis should replicate a current publication for which there is available data. Replication should be done in R. Please contact Andre Guettler if you are interested.
Cboe VIX Earnings
According to an influential academic study (Griffin and Shams, 2018), the VIX is vulnerable to manipulation. However, Cboe Exchange, being responsible for the product, keeps quiet about the massive criticism. This behaviour might be the case because the VIX is a lucrative product of Cboe Exchange. This thesis should deduce an estimate of the gross profit and/or earnings per share of Cboe Exchange attributable to the VIX. Please contact Tim Baumgartner if you are interested.
Background of Recurring One-Day Event Studies
Extensive literature exists on event studies for longer time periods. In contrast, how to analyze an abnormal effect of - for instance - one particular day in every month is a more advanced problem. This thesis should give an overview of feasible approaches. Please contact Tim Baumgartner if you are interested.
International Volatility Indices and their Settlement Procedures
While the fear-gauge VIX is the most prominent volatility index in the US, there are various other (international) volatility indices worldwide. This thesis should give an overview of these indices, how the index values are calculated and discuss how derivatives upon them are settled on expiration. Please contact Tim Baumgartner if you are interested.
US Dollar Funding of Foreign Banks and Financial Stability
Total assets of branches and agencies of foreign banks operating in the United States amount to more than 2 trillion USD (source). There is high degree of concentration in this market with the largest five foreign jurisdictions accounting for more than 70% of the total assets. IMF’s Global Financial Stability Report (IMF, 2019) identifies global non-US bank’s dollar funding as a source of financial vulnerability. This thesis should analyze how foreign banks in the US are organizing their US activities via branches. The aim is to understand the motivation of different countries/banks to be active in this market and identify some of the risks that the US branches may pose for their respective parent banks. BIS (2019) provides a good starting point. The data for this thesis is provided (FFIEC call reports). If you are interested, please contact Mahvish Naeem.
Comparability of Basel Risk Weights in the EU Banking Sector
This thesis should replicate and extend a SUERF policy note on the comparability of Basel risk weights in the EU banking sector (VoxEU article and OeNB Financial Stability Report) based on the newly released data of the EBA 2019 Transparency Exercise. Extensions could consist of comparing different time periods (see past EBA Transparency Exercises) to assess whether the heterogeneity among Basel risk weights has increased or decreased over time. If you are interested, please contact Mahvish Naeem.
Evolution of Bank Business Models in Europe (reserved)
Ayadi et al. (2011) provide a method for determining the business models of European banks based on a cluster analysis of banks’ balance sheet information. The student is expected to perform the cluster analysis for different points in time, at least capturing 2003, 2007, 2009, 2013 and 2016. This analysis aims to provide insights on how the business models of European banks have evolved prior to the global financial crisis and afterwards. The data is available via Bloomberg. Please contact Mahvish Naeem if interested.