Today, Bumper, a DeFi platform, released the results of a simulation showing new pricing efficiency for options desks using their platform compared to the use of standard options. The results of Bumper’s dynamic pricing, which is based on future volatility rather than the more common implied volatility, are highlighted in a report. The report is the result of a two-year R&D effort funded by a $20 million investment and developed in conjunction with CADLabs and the Swiss Centre for Cryptoeconomics.
What the report tells us about Bumper and the DeFi market
Bumper is a DeFi risk market that cushions investors against losses caused by sudden drops in the value of their crypto holdings. Bumper says that the economic simulation report published today is the most compelling evidence yet for the superiority of its novel technique. Also, it portends one of the most serious challenges to Black-Scholes determined pricing in half a century.
Based on the results of the simulation, Bumper looks like a great investment opportunity for institutional and fund managers as well as individual crypto investors. Using real, multi-year historical cryptocurrency market data and options prices, the report details a breakthrough in financial technology by showcasing a brand-new financial instrument that consistently outperforms existing options desks in generating both competitive premia and sustainable yields.
The simulation report’s highlights demonstrate that, on average, Bumper Takers paid 9.3 percent less in premia than buyers of standard put options. According to the report, Bumper’s simulation revealed a 46.2% increase in yield for Makers compared to options pricing in 2022’s bad market, and this was accomplished without the use of token incentives.
Also, the protocol was found to be solvent throughout the whole simulation. Bumper’s findings show a remarkable correlation with the Black-Scholes model, which was awarded the Nobel Prize despite using quite different inputs and technique.
These findings have been essential in gaining insight into and improving the Bumper’s robustness throughout a wide range of market scenarios. Bumper has the potential to change not only the crypto options market, but also traditional finance and the massive $13T derivatives market, by challenging and maybe redefining the current standards of options pricing.