Premiums

How Bumper Calculates 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


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.

On average, hedging risk with Bumper is 30% cheaper than observed market prices for ETH put options.

Bumper’s novel architecture incorporates the most notable financial algorithm since the Black-Scholes formula was conceived over 50 years ago. 

Dynamically priced premiums, calculated based on market activity and protocol health, are designed to minimise the cost of protection, making Bumper more attractive than buying options contracts.

Example: Single Position Analysis

Date

Deposited Value

ETH Amount

Term (Days)

Floor Level*

Deribit Premium

Bumper Premium

Saving

09/12/2022

$10,000

6.427

120

70%

$506.63

$192.06

62.09%

08/02/2023

$10,000

5.290

90

85%

$416.82

$338.63

18.76%

06/04/2023

$10,000

5.979

60

90%

$496.78

$328.48

33.88%

11/05/2023

$10,000

7.830

30

95%

$384.33

$326.09

15.15%

Date

09/12/2022

Deposited Value

$ 10,000

ETH Amount

6.427

Term (Days)

120

Floor Level*

70%

Deribit Premium

$ 506.63

Bumper Premium

$ 192.06

Saving

62.09%

Date

09/12/2022

Deposited Value

$ 10,000

ETH Amount

6.427

Term (Days)

120

Floor Level*

70%

Deribit Premium

$ 506.63

Bumper Premium

$ 192.06

Saving

62.09%

Date

09/12/2022

Deposited Value

$ 10,000

ETH Amount

6.427

Term (Days)

120

Floor Level*

70%

Deribit Premium

$ 506.63

Bumper Premium

$ 192.06

Saving

62.09%

Date

06/04/2023

Deposited Value

$10,000

ETH Amount

5.979

Term (Days)

60

Floor Level*

90%

Deribit Premium

$ 496.78

Bumper Premium

$ 328.48

Saving

33.88%

*Equivalent to Put Option strike price, based on the last 12 months ETH price data.