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Scenario margin and constant maturity volatility for onchain equity options

Specification and reference for an onchain equity options exchange. Every figure in these pages is produced by the reference implementation and regenerated by npm run emit. The same content is available as a single page specification for reading or printing.

Introduction

OverviewWhat the protocol is and what ships today. Why onchain options failedThe combinatorial argument, and what follows from it. ArchitectureThe modules, what each one owns, and how they compose. QuickstartClone, test, price an option, reproduce every figure.

Pricing

NotationSymbols and the units Greeks are reported in. Model and assumptionsBlack-Scholes-Merton, and where each assumption is violated. GreeksAnalytic derivatives in desk units, checked numerically. The volatility surfaceSkew, curvature and term structure from four parameters. Implied volatilityNewton with bisection fallback, and when vol is not identified.

Volatility perpetuals

Constant maturity indicesWhy a perpetual on a fixed contract is ill posed. FundingPremium, damping and the cap that prevents cascades.

Margin

Scenario constructionFull revaluation across a spot and volatility grid. Horizon scalingWhy a fixed grid encodes a two week liquidation horizon. Requirements and nettingInitial, maintenance, liquidation and why spreads net. Cross symbol marginFactor structure, stressed betas and where diversification credit comes from.

Credit

The advance rateBorrowing power derived from scenario loss. Measured advance ratesThe ladder by moneyness, and why hedging raises it.

Settlement

Claims and resolutionTyped grammar, commitments and the resolution ladder. Listing and adaptersA symbol trades once its adapter is ratified.

Reference

API: options.jsPricing, Greeks, surface and solver. API: perp.jsIndices, funding, margin and collateral. VerificationAnchors, invariants and the defects these caught. LimitationsWhat is unsolved, at the same length as the results.