Bumper, a decentralized finance (DeFi) platform, has announced groundbreaking research that exhibits new pricing efficiencies over traditional options desks ahead of the protocol launch in August 2023. This report is a result of two years of research and development, powered by a $20 million investment, and developed in collaboration with CADLabs and the Swiss Centre for Cryptoeconomics.
The report showcases an innovative financial instrument that consistently outperforms existing options desks in generating both competitive premia and sustainable yields, backtested against genuine, multi-year historical cryptocurrency market data and options prices. The report marks a seismic shift in the digital asset landscape and is a milestone in financial technology.
Bumper’s dynamic pricing is based on forward volatility rather than the usual implied volatility. The report underscores the anticipated outcomes of this dynamic pricing and positions Bumper as an immensely appealing prospect for institutions and fund managers, in addition to retail cryptocurrency investors.
The simulation report released by Bumper exhibits some key findings that position Bumper as a potential game-changer in the derivatives market. On average, Bumper Takers paid 9.3% cheaper premia than buyers of traditional put options. During the 2022 bear market, Bumper’s simulation showed a yield improvement of 46.2% for Makers compared to options pricing, without resorting to token incentives. The protocol remained solvent throughout the simulated conditions and despite having different inputs and methodology, Bumper’s results reveal a remarkable correlation with the Nobel Prize-winning Black-Scholes model.
Bumper’s CEO Jonathan DeCarteret expressed that by challenging and potentially reshaping the accepted norms of options pricing, Bumper stands to revolutionize not just the crypto options market but also has the potential to penetrate traditional finance and disrupt the colossal $13T derivatives market in the future.
Bumper is a DeFi risk market that provides protection from downside volatility in the price of crypto assets. Users buying protection (Takers) set a price at which they wish to protect their crypto should the price fall, but they don’t lose out if the market heads upwards. Conversely, other users (Makers) earn a yield by providing stablecoin liquidity to the protocol.
The economic simulation report released by Bumper marks the most significant validation of Bumper’s innovative approach to date and signals what could be one of the most substantial challenges to the Black-Scholes derived pricing in half a century. To learn more about Bumper, visit their website, Twitter, Discord, or YouTube channel.
