Umbrella Network, the decentralised Layer-2 oracle solution, has launched its arbitrage-free pricing model for crypto derivatives. This new offering aims to bring arbitrage-free information for option pricing to the crypto ecosystem, in order to provide users with more comprehensive sets of real-time pricing data.
At launch, arbitrage-free pricing will be available on both Ethereum and Binance Smart Chain, and will offer complete sets of options data for both BTC and ETH, containing the underlying crypto asset, expiry data, call price, put price, and implied volatility. Umbrella Network is currently including 660 new pairs covering 220 options instruments, for more profitable trading. DeFi applications will be able to access the data feeds via Umbrella Network’s Layer 2 Data (L2D) on both chains.
Currently, there is a lack of data and liquidity within the DeFi options space, specifically on strikes or maturities, which has led to gaps in values for option prices. In an immature market, where there is a lack of information and the data is sparse, market participants may find themselves trading on partial information. In addition, due to the lack of data and sophisticated data models, DeFi option prices are prohibitively expensive, leading to a thinly traded market. Umbrella Network’s arbitrage-free data feeds remove those pain points, and provide more efficient prices that are competitive with centralised option prices by offering a full overview of options markets, prices that include options with the same maturity, as well as options with the same strike but different maturities.
“DeFi doesn’t have a viable or developed options market,” says Sam Kim, Partner at Umbrella Network. “We felt that offering our advanced arbitrage-free options pricing data will be crucial for the DeFi market given the importance of options in traditional finance, not only for speculation but for risk management. As a decentralised oracle service, we work with data that is necessary to calculate true arbitrage-free option prices. So to us, spearheading this movement towards efficient option pricing is the next step to building a thriving derivatives market.”