Understanding Crypto Fundamentals: Value Investing in Cryptoassets and Management of Underlying Risks

© The Author(s), under exclusive license to APress Media, LLC, part of Springer Nature 2023

T. JeegersUnderstanding Crypto Fundamentalshttps://doi.org/10.1007/978-1-4842-9309-6_14

14. Financial Risk Management

Thomas Jeegers¹  

(1)

Vienna, Austria

 

Risk is a function of how poorly a strategy will perform if the “wrong” scenario occurs.

—Michael Porter

Similar to non-financial risk, financial risk is higher for cryptoassets than traditional investments. For example, as introduced in Chapter 4, the most traditional measure of financial risk is volatility, expressed as the standard deviation of returns. Downward volatility is another helpful metric used as an input to compute the Sortino ratio, which was introduced in the same chapter. Both metrics indicate ...