• Corpus ID: 248965466

Replicating Portfolios: Constructing Permissionless Derivatives

@inproceedings{Sterrett2022ReplicatingPC,
  title={Replicating Portfolios: Constructing Permissionless Derivatives},
  author={Estelle Sterrett and Waylon Jepsen and Evan Y. Kim},
  year={2022}
}
The current design space of derivatives in Decentralized Finance (DeFi) relies heav-ily on oracle systems. Replicating market makers (RMMs) provide a mechanism for converting specific payoff functions to an associated Constant Function Market Makers (CFMMs). We leverage RMMs to replicate the approximate payoff of a Black-Scholes covered call option. RMM-01 is the first implementation of an on-chain expiring option mechanism that relies on arbitrage rather than an external oracle for price. We… 

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