Calculated on a daily basis and applied ex-post facto depending on how volatile the market gets, the cost of Bumper’s price protection comprises of both a fixed and a variable element.
Pricing efficiency is achieved by charging premiums dynamically in response to measured volatility during a protection term.
Users have confidence in the manner in which the smart contract enforces fair premiums, and the mitigation of risk.
Premiums are calculated and are applied in aggregate onto the asset pool. Bumper calculates and deducts the accumulated premium payable by that individual user when the position is closed.
This means that although premiums of an individual protection position cannot be known in advance, the method of their calculation is known and based ultimately on volatility in the market.
Bumper’s novel architecture incorporates the most notable financial algorithm since the Black-Scholes formula was conceived over 50 years ago.
Dynamically priced premiums, calculated based on market activity and protocol health, are designed to minimise the cost of protection, making Bumper more attractive than buying options contracts.
Example: Single Position Analysis
Date
Deposited Value
ETH Amount
Term (Days)
Floor Level*
Deribit Premium
Bumper Premium
Saving
09/12/2022
$10,000
6.427
120
70%
$506.63
08/02/2023
$10,000
5.290
90
85%
$416.82
06/04/2023
$10,000
5.979
60
90%
$496.78
11/05/2023
$10,000
7.830
30
95%
$384.33
Date
09/12/2022
Deposited Value
$ 10,000
ETH Amount
6.427
Term (Days)
120
Floor Level*
70%
Deribit Premium
$ 506.63
Date
09/12/2022
Deposited Value
$ 10,000
ETH Amount
6.427
Term (Days)
120
Floor Level*
70%
Deribit Premium
$ 506.63
Date
09/12/2022
Deposited Value
$ 10,000
ETH Amount
6.427
Term (Days)
120
Floor Level*
70%
Deribit Premium
$ 506.63
Date
06/04/2023
Deposited Value
$10,000
ETH Amount
5.979
Term (Days)
60
Floor Level*
90%
Deribit Premium
$ 496.78
*Equivalent to Put Option strike price, based on the last 12 months ETH price data.
