{
  "abstract": "Cryptocurrency markets exhibit extreme price swings and sentiment-driven regime shifts, which traditional volatility models often fail to capture. To address this, we develop a partially observed Markov processes (POMP) model augmented with sentiment and heavy-tailed distributions. Specifically, we extend Breto's framework by including the Fear and Greed Index (FGI) as an exogenous regressor in the latent volatility dynamics and replacing Gaussian measurement noise with a Student's t distribution. We fit the model via simulation-based inference using daily Bitcoin returns and FGI data from January 2020 to April 2025. Our approach significantly outperforms three benchmark models in log-likelihood and filter stability. Moreover, our model yields interpretable parameters consistent with known features of financial volatility. These results demonstrate that incorporating sentiment signals and heavy-tailed noise improves the modeling of volatility and regime shifts in cryptocurrency markets.",
  "abstract_shown": true,
  "affiliations": [],
  "article_type": null,
  "arxiv": "2609.23250",
  "author_total": 4,
  "authors": [
    {
      "name": "Abeyankar Giridharan"
    },
    {
      "name": "Chang Li"
    },
    {
      "name": "Suvrorup Mukherjee"
    },
    {
      "name": "Xinhe Wu"
    }
  ],
  "bibtex": "https://research.draconitic.com/paper/3reyr6m7wcrne.bib",
  "cited_by": 0,
  "doi": "10.48550/arxiv.2609.23250",
  "fulltext_url": null,
  "id": "3reyr6m7wcrne",
  "issns": [],
  "landing_url": "https://arxiv.org/abs/2609.23250",
  "language": null,
  "licence": "CC-BY-4.0",
  "licence_label": "CC BY 4.0",
  "licence_source": "article",
  "licence_url": "http://creativecommons.org/licenses/by/4.0/",
  "metadata_licence": "CC0-1.0",
  "native_subjects": [
    [
      "arxiv",
      "stat.AP"
    ],
    [
      "openalex",
      "2003|Financial Risk and Volatility Modeling"
    ]
  ],
  "openalex": "W7214032917",
  "pdf_url": "https://arxiv.org/pdf/2609.23250",
  "pmcid": null,
  "pmid": null,
  "published": "2026-09-22",
  "publisher": null,
  "ris": "https://research.draconitic.com/paper/3reyr6m7wcrne.ris",
  "sources": [
    {
      "first_seen": "2026-10-30T12:24:06Z",
      "native_id": "2609.23250",
      "source": "arxiv",
      "url": "https://arxiv.org/abs/2609.23250"
    }
  ],
  "subjects": [
    {
      "field": "mathematics",
      "origin": "arxiv:stat.AP",
      "subfield": "statistics"
    }
  ],
  "title": "Fear Moves Markets: Sentiment-Augmented POMP for Volatility Modeling of Bitcoin Returns",
  "title_text": "Fear Moves Markets: Sentiment-Augmented POMP for Volatility Modeling of Bitcoin Returns",
  "type": "preprint",
  "updated_at": "2026-10-30T12:24:06Z",
  "url": "https://research.draconitic.com/paper/3reyr6m7wcrne",
  "venue": "arXiv",
  "versions": []
}