A naukri.com initiative
Hackernoon
1w
221
Image Credit: Hackernoon
The Premises of a Yield Market Using Perpetual Constant Maturity Options
- DeFi lacks natural interest rates, leading to challenges in replicating mature interest rate markets.
- DeFi can create a yield market using Perpetual Constant Maturity Options (PCMOs) for yield trading.
- In a yield market, participants must choose between Short and Long positions for generating revenue.
- A proper yield market requires observability, measurability, consistency, controlled volatility, and a structured yield curve.
- Market liquidity in a yield market can be ensured by structuring yield revenues to favor positions against market expectations.
- PCMOs serve as the foundation of DeFi's yield market, offering synthetic perpetual futures and a cost of carry mechanism.
- Notional-weighted yield distributions and drift-adjusted strikes help maintain liquidity and balance in the yield market.
- PCMOs provide a structured and tradable yield curve for DeFi, unlocking new financial instruments beyond traditional interest models.
- The yield term structure generated by PCMOs shows differing yields based on price variations and market movements.
- PCMOs introduce an innovative yield market structure, ensuring liquidity and directional yield generation in DeFi.
Read Full Article
13 Likes
For uninterrupted reading, download the app