Available Master thesis topics

Crypto assets:

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.

Can we hedge inflation risk by holding Bitcoin?

The thesis should analyze whether Bitcoin (and other major crypto assets) 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.

On-chain analysis

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 cleansing effect of flash loan attacks

The thesis should investigate flash loans. Besides characterising these type of short-term, uncollateralized loans, the cleansing effect of flash loan attacks should be analyzed, i.e., how vulnerable protokols such as  bZX or Harvest Finance have been (see first material here and here; more technical paper). In some way, flash loans facilitate stress testing new protokols and hence can be seen as getting rid of poorly designed DeFi protokols. Please contact Andre Guettler if you are interested. 

Applied Technical Analysis Using Python: The Case of Crypto Assets

The thesis should analyze whether there are market inefficiencies that enable profitable trading strategies in crypto assets. Besides the usual backward-looking backtests, the thesis should run a true out-of-sample trading algorithm using Python with paper money (e.g., by running the code in the Coinbase Pro sandbox). See related papers here and here. The thesis requires reasonable knowledge in Python (or at least being willing to dive into this area). Please contact Andre Guettler if you are interested. 

Bitcoin Variance Swaps

There are Bitcoin Variance Swaps traded, based on the Bitcoin Volatility Index BVIN. This thesis should examine the variance risk premium and the settlement of these products to assess to what extent they are vulnerable to market manipulation. We recommend this paper and this blog post as starting point. Please contact Tim Baumgartner 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.

Replication Exercises

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.