Regime- and Tail-Dependent Performance of CVaR-Based Portfolio Strategies in Cryptocurrencies

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Authors: Tsolmon Sodnomdavaa
Cited by: 0

Abstract

Cryptocurrency markets are characterized by extreme volatility, fat-tailed return distributions, and frequent regime shifts, challenging traditional mean–variance portfolio optimization. In such environments, downside risk management becomes central, and tail-sensitive measures such as Conditional Value-at-Risk (CVaR) are increasingly adopted. However, empirical evidence remains mixed regarding whether CVaR-based strategies provide consistent protection across market regimes and tail depths. This study conducts a comprehensive empirical evaluation of tail-risk-based portfolio strategies using cryptocurrency data from 2018 to 2025. A rolling-window back-testing framework with weekly rebalancing is employed. We compare traditional benchmarks, moment-based and robust CVaR strategies, regime-dependent CVaR optimization, regression-enhanced ES–CVaR hybrids, and reinforcement learning-based CVaR policies. Performance is evaluated using mean return, volatility, CVaR at multiple confidence levels (90%, 95%, and 99%), and maximum drawdown. Market regimes are identified through volatility-based rules, and robustness is assessed via sensitivity analysis and block-bootstrap confidence intervals. The results show that no single strategy dominates across all conditions. Hybrid ES–Reg–CVaR strategies provide stable protection under moderate tail risk, reinforcement learning-based CVaR strategies adapt better to extreme tails, and regime-based CVaR optimization consistently limits drawdowns during stress periods. These findings demonstrate that effective CVaR-based portfolio management in cryptocurrency markets requires a regime- and tail-depth-dependent approach rather than a universal optimization rule.

Fields of Study & Subjects

Risk and Portfolio Optimization Financial Risk and Volatility Modeling Financial Markets and Investment Strategies

Publication details

Journal / source
International Journal of Financial Studies
Volume
14
Issue
3
Pages
53–53
Publication date
1 March 2026
Language
EN