Ā
Learning Objectives:
-
Master DeFi derivatives and their underlying mechanics
-
Understand perpetual contracts and funding rates
-
Learn options trading strategies and pricing
-
Analyze synthetic assets and their applications
-
Evaluate derivative risks and risk management strategies
5.6.1: What are DeFi Derivatives? – The Complete Picture
Definition and Core Concepts
Derivatives are financial contracts whose value depends on an underlying asset, index, or benchmark. DeFi derivatives bring these instruments on-chain, enabling permissionless trading, hedging, and speculation.
Traditional vs DeFi Derivatives: Traditional Derivatives (CeFi): āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Characteristics: ā ā ā¢ Centralized exchanges (CME, CBOE) ā ā ā¢ Regulated brokers ā ā ā¢ Fiat settlement ā ā ā¢ Limited access ā ā ā¢ High minimums ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā DeFi Derivatives: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Characteristics: ā ā ā¢ Decentralized exchanges (dYdX, GMX) ā ā ā¢ Smart contract execution ā ā ā¢ Crypto settlement ā ā ā¢ Permissionless access ā ā ā¢ Low minimums (0.1 ETH) ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā
Why Derivatives Matter in DeFi:
Derivatives Use Cases: 1. Hedging: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Protect against price drops ā ā ā¢ Lock in profits ā ā ā¢ Reduce portfolio risk ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 2. Speculation: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Leveraged directional bets ā ā ā¢ Profit from price movements ā ā ā¢ Access to new markets ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 3. Arbitrage: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Profit from price differences ā ā ā¢ Risk-free returns ā ā ā¢ Market efficiency ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 4. Price Discovery: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Efficient price formation ā ā ā¢ Market sentiment ā ā ā¢ Future price expectations ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā
5.6.2: Perpetual Contracts – The Most Popular Derivative
What are Perpetuals?
Perpetual contracts (perpetuals) are derivative instruments that track the price of an underlying asset without an expiry date. They are the most popular DeFi derivative.
Perpetual Contract Characteristics: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Perpetual Contract ā ā ā ā No Expiry: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā¢ Never expires ā ā ā ā ā¢ Can hold indefinitely ā ā ā ā ā¢ No settlement date ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā Leverage: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā¢ 1x to 100x leverage ā ā ā ā ā¢ Amplified profits and losses ā ā ā ā ā¢ Margin requirement ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā Funding Rate: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā¢ Periodic payments between longs and shorts ā ā ā ā ā¢ Keeps price aligned with spot ā ā ā ā ā¢ 8-hour intervals ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā Long/Short: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā¢ Long: Bet on price increase ā ā ā ā ā¢ Short: Bet on price decrease ā ā ā ā ā¢ Can profit in both directions ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā
Funding Rate Mechanics:
The funding rate ensures the perpetual price stays close to the spot price.
Funding Rate Formula: Funding Rate = (Mark_Price - Index_Price) / Index_Price + Interest_Rate Components: 1. Premium: Difference between mark and index price 2. Interest: Base rate (usually 0.01%) If Mark_Price > Index_Price (Bullish): - Longs pay shorts - Incentivizes shorts to enter - Pushes price down If Mark_Price < Index_Price (Bearish): - Shorts pay longs - Incentivizes longs to enter - Pushes price up Example Calculation: Index Price: $3,000 Mark Price: $3,030 Premium: 1% (30/3000) Interest: 0.01% (0.0001) Funding Rate = 0.01 + 0.0001 = 0.0101 (1.01%) Payment (Long Position, 1 ETH): - 1.01% Ć 1 ETH = 0.0101 ETH paid to shorts - 8-hour payment cycle Funding Rate History: - Positive: Longs pay shorts (bullish) - Negative: Shorts pay longs (bearish) - Typically 0.01-0.10% per 8 hours
Leverage and Margin:
Leverage Mechanics: Position Size = Margin Ć Leverage Example: - Margin: 1 ETH ($3,000) - Leverage: 10x - Position Size: 10 ETH ($30,000) Price Change Impact: - 1% Price Increase: 10% Profit - 1% Price Decrease: 10% Loss - 10% Price Decrease: 100% Loss (Liquidation) Margin Requirements: - Initial Margin: 1/leverage - Maintenance Margin: 0.5-1% - Liquidation: When margin falls below maintenance Liquidation Price: Long Position: Liquidation Price = Entry Price Ć (1 - 1/Leverage + Maintenance/2) Short Position: Liquidation Price = Entry Price Ć (1 + 1/Leverage - Maintenance/2) Example (Long, 10x Leverage): Entry: $3,000 Liquidation: $3,000 Ć (1 - 0.10 + 0.005) = $2,715
5.6.3: Options – The Right, Not the Obligation
Option Basics:
Options give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price before a specific date.
Option Types: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Call Option ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā Right to BUY at strike price ā ā ā ā Profits if price goes UP ā ā ā ā Pay premium (cost) ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Put Option ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā Right to SELL at strike price ā ā ā ā Profits if price goes DOWN ā ā ā ā Pay premium (cost) ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Option Styles ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā European: Exercise only at expiry ā ā ā ā American: Exercise anytime before expiry ā ā ā ā Most DeFi options: European (simpler) ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā
Option Pricing – The Black-Scholes Model:
The Black-Scholes model is the standard for pricing European options.
Black-Scholes Formula: C = S Ć N(dā) - K Ć e^(-rt) Ć N(dā) Where: C = Call Option Price S = Current Asset Price K = Strike Price r = Risk-Free Rate t = Time to Expiry Ļ = Volatility dā = (ln(S/K) + (r + ĻĀ²/2) Ć t) / (Ļ Ć āt) dā = dā - Ļ Ć āt Put Option Price: P = K Ć e^(-rt) Ć N(-dā) - S Ć N(-dā) Example (ETH Option): S = $3,000 K = $3,200 t = 30 days (0.082 years) Ļ = 80% r = 5% dā = (ln(3000/3200) + (0.05 + 0.64/2) Ć 0.082) / (0.8 Ć ā0.082) dā = (-0.0645 + 0.0305) / 0.229 dā = -0.148 dā = -0.148 - 0.229 = -0.377 N(dā) = 0.441 N(dā) = 0.353 Call Price = 3000 Ć 0.441 - 3200 Ć e^(-0.0041) Ć 0.353 Call Price = 1323 - 1126 = $197
Option Strategies:
Ā
Ā
| Strategy | Setup | Direction | Risk/Reward |
|---|---|---|---|
| Long Call | Buy Call | Bullish | Limited loss (premium) |
| Long Put | Buy Put | Bearish | Limited loss (premium) |
| Covered Call | Hold asset + Sell Call | Neutral | Limited upside |
| Protective Put | Hold asset + Buy Put | Bullish | Protects downside |
| Straddle | Buy Call + Buy Put | Volatile | High cost |
| Spread | Buy + Sell Options | Various | Limited risk/reward |
5.6.4: Synthetic Assets
What are Synthetics?
Synthetic assets are tokenized derivatives that track the price of real-world assets without holding the underlying.
Synthetic Asset Examples: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Synthetic Assets ā ā ā ā sUSD: Synthetic USD ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā¢ Tracks USD price ā ā ā ā ā¢ Collateral: SNX tokens ā ā ā ā ā¢ No underlying USD needed ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā sETH: Synthetic ETH ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā¢ Tracks ETH price ā ā ā ā ā¢ Collateral: SNX tokens ā ā ā ā ā¢ No underlying ETH needed ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā sBTC: Synthetic Bitcoin ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā¢ Tracks BTC price ā ā ā ā ā¢ Collateral: SNX tokens ā ā ā ā ā¢ No underlying BTC needed ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā
Synthetix Architecture:
Synthetix System: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā Synthetix Architecture ā ā ā ā Collateral: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā Users stake SNX tokens ā ā ā ā Collateral Ratio: 400-500% ā ā ā ā Earns SNX rewards ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā ā Minting: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā Mint sUSD against SNX collateral ā ā ā ā Debt obligation created ā ā ā ā Synthetic assets minted ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā ā Trading: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā Swap between synthetics ā ā ā ā No slippage (peer-to-contract) ā ā ā ā Fees paid in SNX ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā ā ā Debt Pool: ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā ā All synth holders share debt ā ā ā ā Profits increase SNX value ā ā ā ā Losses decrease SNX value ā ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā
Benefits and Risks of Synthetics:
Benefits: 1. Access to Real-World Assets: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Trade stocks (sTSLA, sAAPL) ā ā ā ā¢ Trade commodities (sGOLD, sOIL) ā ā ā ā¢ Trade currencies (sEUR, sJPY) ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 2. No Custody Required: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ No need to hold underlying ā ā ā ā¢ No custody fees ā ā ā ā¢ No counterparty risk ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 3. Permissionless Trading: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Anyone can trade ā ā ā ā¢ No KYC/AML required ā ā ā ā¢ 24/7 trading ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā Risks: 1. Collateral Risk: Collateral value drops 2. Oracle Risk: Wrong asset prices 3. Debt Pool Risk: Shared losses 4. Liquidation Risk: Collateral ratio falls
5.6.5: Major DeFi Derivative Platforms
dYdX:
dYdX Platform: Features: - Perpetual contracts - Up to 20x leverage - Order book DEX - Layer-2 (Starkware) - Non-custodial Assets: - ETH-PERP - BTC-PERP - SOL-PERP - LINK-PERP - AVAX-PERP Volume: $1B+ daily Fee Structure: - Maker: -0.05% (rebate) - Taker: 0.05-0.10% - Funding rate: Variable
GMX (Arbitrum):
GMX Platform: Features: - Perpetual contracts - Up to 30x leverage - AMM-based pricing - Multi-asset pools - Real yield Assets: - ETH-PERP - BTC-PERP - AVAX-PERP - GMX-PERP Volume: $100M+ daily Fee Structure: - Swap fee: 0.1-0.8% - Borrow fee: Dynamic - Funding rate: Variable - GLP: 70% of fees
Synthetix:
Synthetix Platform: Features: - Synthetic assets - Futures (coming) - Options (coming) - SNX staking - Debt pool Assets: - sUSD, sETH, sBTC - sTSLA, sAAPL - sGOLD, sOIL TVL: $4B+ Fee Structure: - Exchange fee: 0.1-0.5% - SNX staking: 20-40% APR - Debt pool: Variable
5.6.6: Derivative Risks – Complete Analysis
Risk Matrix:
Ā
Ā
| Risk | Severity | Description | Mitigation |
|---|---|---|---|
| Liquidation | Critical | Position liquidated | Monitor margin |
| Leverage Risk | High | Amplified losses | Use lower leverage |
| Funding Rate | Medium | Additional costs | Monitor rates |
| Oracle Risk | High | Wrong price data | Use multiple oracles |
| Smart Contract | High | Protocol bugs | Audits, insurance |
| Slippage | Low | Price impact | Use limit orders |
| Counterparty | Low | Protocol failure | Diversify |
| Liquidity | Medium | Cannot exit | Check depth |
Liquidation Example:
Liquidation Scenario: Position: Long 1 BTC Entry Price: $60,000 Leverage: 10x Margin: 0.1 BTC ($6,000) Position Size: 1 BTC ($60,000) Liquidation Price: $54,000 Price Drops to $54,000: - Loss: $6,000 (100% of margin) - Position liquidated - User loses $6,000 If Price Recovers: - No recovery - Position gone - User loses all margin Prevention: - Use lower leverage (2-5x) - Add margin - Set stop-losses - Monitor regularly
5.6.7: Derivative Strategies
Simple Strategies:
1. Long (Bullish): āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Buy perpetual (long) ā ā ā¢ Profit if price goes up ā ā ā¢ Example: Buy ETH-PERP at $3,000 ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 2. Short (Bearish): āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Sell perpetual (short) ā ā ā¢ Profit if price goes down ā ā ā¢ Example: Short ETH-PERP at $3,000 ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 3. Hedging: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Protect existing position ā ā ā¢ Example: Hold ETH, short ETH-PERP ā ā ā¢ Risk-free (if matched) ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 4. Arbitrage: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Profit from price differences ā ā ā¢ Example: Buy spot, sell perpetual ā ā ā¢ Capture funding rate ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā
5.6.8: Regulatory Considerations
Current Regulatory Landscape:
Regulatory Status: Region | Status | Requirements -------|--------|------------- US | Restricted | Limited DeFi access EU | Regulated | MiCA (2024+) UK | Regulated | FCA oversight Asia | Mixed | Varies by country Compliance Requirements: 1. KYC/AML (some protocols) 2. Tax reporting 3. Position limits 4. Capital requirements Future Trends: 1. Increasing regulation 2. Compliance tools 3. Institutional adoption 4. Hybrid models
5.6.9: Future of DeFi Derivatives
Emerging Trends:
Future Developments: 1. Options Protocols: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ More options products ā ā ā¢ Improved pricing ā ā ā¢ User-friendly interfaces ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 2. Structured Products: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Complex derivatives ā ā ā¢ Yield enhancement ā ā ā¢ Risk management ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 3. Real-World Assets: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Stocks ā ā ā ā¢ Bonds ā ā ā ā¢ Commodities ā ā ā ā¢ Real estate ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā 4. Cross-Chain: āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā ā ā¢ Multi-chain support ā ā ā¢ Cross-chain arbitrage ā ā ā¢ Interoperability ā ā āāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāāā
1. Perpetual Contract Math
Perpetual Contract Value: P = S Ć (1 + r Ć t) + f Where: P = Perpetual Price S = Spot Price r = Funding Rate t = Time to Next Funding f = Premium/Discount Mark Price Calculation: Mark Price = Index Price + (Premium Ć K) Where K = 0.01 (smoothing factor) Liquidation Calculation: Liquidation Price = Entry Price Ć (1 - 1/Leverage + Maintenance/2)
2. Option Greeks
Option Greeks: 1. Delta (Ī): Rate of change of option price with underlying Ī = N(dā) for calls Ī = N(dā) - 1 for puts 2. Gamma (Ī): Rate of change of delta Ī = N'(dā) / (S Ć Ļ Ć āt) 3. Vega (V): Sensitivity to volatility V = S Ć N'(dā) Ć āt 4. Theta (Ī): Time decay Ī = -(S Ć N'(dā) Ć Ļ)/(2āt) - r Ć K Ć e^(-rt) Ć N(dā) 5. Rho (Ļ): Sensitivity to interest rate Ļ = K Ć t Ć e^(-rt) Ć N(dā)