Crypto quanto and inverse options

【Author】 Alexander, Carol; Chen, Ding; Imeraj, Arben

【Source】MATHEMATICAL FINANCE

【影响因子】2.894

【Abstract】Over 90% of exchange trading on crypto options has always been on the Deribit platform. This centralized crypto exchange only lists inverse products because they do not accept fiat currency. Likewise, other major crypto options platforms only list crypto-stablecoin trading pairs in so-called direct options, which are similar to the standard crypto options listed by the CME except the US dollar is replaced by a stablecoin version. Until now a clear mathematical exposition of these products has been lacking. We discuss the sources of market incompleteness in direct and inverse options and compare their pricing and hedging characteristics. Then we discuss the useful applications of currency protected "quanto" direct and inverse options for fiat-based traders and describe their pricing and hedging characteristics, all in the Black-Scholes setting.

【Keywords】cryptocurrency; foreign exchange; hedging; incomplete market; inverse option

【发表时间】2023 2023 JUL 11

【收录时间】2023-07-23

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-市场分析