Calculated on a daily basis and applied ex-post facto depending on how volatile the market gets, the cost of Bumper’s price protection comprises of both a fixed and a variable element.
Pricing efficiency is achieved by charging premiums dynamically in response to measured volatility during a protection term.
Users have confidence in the manner in which the smart contract enforces fair premiums, and the mitigation of risk.
Premiums are calculated and are applied in aggregate onto the asset pool. Bumper calculates and deducts the accumulated premium payable by that individual user when the position is closed.
This means that although premiums of an individual protection position cannot be known in advance, the method of their calculation is known and based ultimately on volatility in the market.
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