Does the Dividend Yield Input Apply to Crypto Options Pricing?
The traditional dividend yield input does not directly apply to most cryptocurrencies, as they are not shares of a company that pay dividends. However, an analogous concept is the coin-specific yield from staking or other network rewards.
This yield must be factored in as a continuous payout rate in the pricing model, similar to a dividend yield.
Glossar
Put-Call Parity
Relationship ⎊ Put-call parity describes a fundamental relationship between the price of a European call option, a European put option, and the underlying asset price, assuming they share the same strike price and expiration date.
Dividend Yield
Valuation ⎊ Dividend yield, within cryptocurrency derivatives, represents the annualized return an investor hypothetically receives from staking or lending protocols, expressed as a percentage of the staked or lent asset’s value.
Continuous Payout Rate
Payout ⎊ Continuous Payout Rate, within the context of cryptocurrency derivatives, options trading, and related financial instruments, represents a mechanism for distributing periodic payments directly proportional to an underlying asset's performance, often implemented through smart contracts or automated systems.