https://www.bitmex.com/app/contract/ETHUSD https://www.bitmex.com/app/contract/ETHUSDM21

How do you apply stochastic quanto pricing formulas to quanto crypto futures and perpetuals? I can see couple limitations:

  • There is no risk free rate in crypto currencies (BTC) to do domestic currency discounting in BTC

  • with so many price jumps they are not following lognormal price dynamics

  • 1
    $\begingroup$ About 8 years ago, when XBT 1 was worth about USD 1, I was pricing some structured trades involving XBT (did not get executed, unfortunately). I assumed that someone was willing to lend/borrow XBT for up to 5 years at some fixed rate. of course the rate we assumed was much less than what it turned out to be. $\endgroup$ Jun 6 at 13:35
  • $\begingroup$ sorry, I meant "when XBT 1 was worth about USD 100" (i.e. 2013-ish). $\endgroup$ Jun 6 at 19:00
  • $\begingroup$ @DimitriVulis you priced them for a client? $\endgroup$
    – simsalabim
    Jun 7 at 14:31
  • $\begingroup$ I priced them for a sell-side desk that receved a client enquiry. Basically, the client was looking into variants of XBT-denominated CDS: pay upfront, receive XBT in some years only if some credit events happen (or conversely doesn't happen). $\endgroup$ Jun 7 at 15:47
  • $\begingroup$ what is your discounting in XBT measure $\endgroup$
    – adam
    Jun 12 at 12:38

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