How Does the Maturity Date of Reserve Assets (E.g. Treasury Bills) Impact Reserve Liquidity?
The maturity date of reserve assets is critical for liquidity. Short-term Treasury Bills (T-Bills) with a maturity of a few months are highly liquid and can be easily sold or allowed to mature quickly to meet redemption demands.
Long-term assets, such as T-Bills maturing in several years, are less liquid because selling them before maturity requires finding a buyer and exposes the issuer to interest rate risk, potentially leading to a loss. Shorter maturity ensures higher liquidity and lower risk of a depeg.
Glossar
Maturity
Duration ⎊ Maturity, within cryptocurrency derivatives, signifies the time remaining until an option or future contract expires, directly impacting time decay ⎊ theta ⎊ and influencing pricing models like Black-Scholes adapted for digital assets.
T-Bills
Issuance ⎊ Treasury Bills, or T-Bills, represent short-term debt obligations issued by a government to finance its operations; within cryptocurrency contexts, they serve as a benchmark for risk-free rates, influencing the pricing of derivatives and stablecoins.
Short-Term Treasury Bills
Maturity ⎊ Short-Term Treasury Bills, frequently abbreviated as T-bills, represent debt obligations issued by the U.S.
Maturity Date
Horizon ⎊ The maturity date, within cryptocurrency derivatives and options trading, represents the specific point in time when a contract ceases to exist and any associated obligations are settled.
Reserve Assets
Collateral ⎊ In the context of cryptocurrency derivatives and options trading, collateral represents the assets pledged by a party to mitigate counterparty risk.