How Does a ‘Zero-Coupon Bond’ Structure Relate to Fully Collateralized Derivatives?
A zero-coupon bond structure is conceptually related in that it is a fully collateralized instrument where the final value is known and guaranteed at maturity. Fully collateralized derivatives aim for a similar certainty of settlement, with 100% of the notional value backed by collateral, thus eliminating counterparty risk and the need for an insurance fund.
Glossar
Fully Collateralized
Guarantee ⎊ Fully collateralized structures within cryptocurrency derivatives represent a risk mitigation strategy where the total value of assets backing a position exceeds its nominal value, effectively eliminating counterparty credit risk.
Bond
Valuation ⎊ A bond, within the context of cryptocurrency derivatives, represents a debt instrument referencing an underlying asset ⎊ often a stablecoin or a basket of crypto assets ⎊ with a predetermined repayment schedule and interest rate, functioning analogously to traditional fixed-income securities but introducing counterparty risk specific to the digital asset space.
Fully Collateralized Derivatives
Collateralization ⎊ Fully Collateralized Derivatives represent a structural evolution within decentralized finance, demanding equivalent asset backing for derivative contract value.