Algorithmic digital asset company GSR announced the launch of a new derivative, called a Variance Swap, which allows investors to hedge their cryptoasset portfolio against the volatility of .
Hedging bitcoin Volatility Using bitcoin Variance Swaps
Hong Kong-based GSR announced in that they now offer a new structured product, called a Variance Swap, which enables traders and investors to hedge volatility.
A variance swap is a financial derivative contract on annualized variance (a measure of volatility) that enables one of the two involved parties in a transaction to pay an amount based on the variance of the price of the underlying asset. The second party in a transaction will pay a fixed amount (the strike price), which is specified at the beginning of the contract.
A Variance Swap, therefore, enables investors to either hedge their digital asset portfolio against by protecting themselves from ’s or to bet on the future developments of the ’s volatility.
For example, if a crypto startup that is naturally long wants to hedge itself against price volatility it can go long on a Variance Swap to “lock in” the volatility and receive the difference between the agreed variance strike and the actual variance, which will compensate for an increase in volatility.
“We are introducing a new product into the world of digital assets that allows traders, investors, businesses or anyone who holds a serious portfolio, to hedge against and take advantage of one of the most common and intimidating parts of crypto markets: volatility,” said GSR co-founder Cristian Gil.
According to , GSR has launched its Variance Swap offering with the two pairs ETH/USD and /USD with maturities out to December 2019.
Who Is GSR?
Founded in 2013, GSR is a leading algorithmic company focused on cryptoassets. The Hong Kong-headquartered house offers market making and OTC for miners, , exchanges, custodians, and banks, among other clients.
The company boasts having traded billions in digital assets through its proprietary software that is able to meet all types of liquidity needs.
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Published at Fri, 26 Apr 2019 15:29:22 +0000
