Premiums

How Bumper calculates Protection Premiums

Bumper premiums work differently to virtually all other financial products in both the traditional and crypto markets. They are designed to be provably fair, price-efficient and represent good value compared to other risk markets.

Price-efficient premiums

Bumper protects you from downside volatility in just a few clicks.


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.

Comparison of Bumper and Put Options

Put Option

Bumper

Premiums applied

Not if triggered

At close

Premium calculation

Not if triggered

Dynamic, depend on measured volatility during the period a position is open.

Network fee

Fixed, set by protocol

Fixed, set by protocol

Additional incentives

None

Sometimes awarded for opening a position

Premiums applied

Not if triggered

Premium calculation

Not if triggered

Network fee

Fixed, set by protocol

Additional incentives

None

Premiums applied

At close

Premium calculation

Dynamic, depend on measured volatility during the period a position is open.

Network fee

Fixed, set by protocol

Additional incentives

Sometimes awarded for opening a position

Learn how Bumper Calculates Premiums

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