How Does the NFT’s Metadata Define the Option’s Payoff Structure?
The NFT's metadata (a JSON file linked by the ERC-721 standard) contains the essential, unchangeable parameters of the option contract, such as the strike price, the underlying asset, and the expiration date. The smart contract's logic references these parameters at the time of exercise or expiration to calculate the final settlement and payoff amount.
Glossar
Unchangeable Parameters
Determinants ⎊ Unchangeable parameters within cryptocurrency derivatives, options trading, and financial derivatives represent foundational inputs to models and contracts, establishing the initial conditions for valuation and risk assessment.
Payoff
Mechanism ⎊ Payoff, within cryptocurrency derivatives, represents the calculated financial outcome of a contract at expiration or a specified trigger event, determined by the underlying asset’s price relative to the contract’s strike price and other parameters.
Payoff Structure
Structure ⎊ The payoff structure defines the potential profit or loss profile of a financial instrument at expiration, based on the price of the underlying asset.
NFT
Provenance ⎊ Non-Fungible Tokens, within cryptocurrency markets, represent a unique cryptographic token linked to a specific digital or physical asset, establishing verifiable ownership and authenticity.
Metadata
Provenance ⎊ Metadata within cryptocurrency, options trading, and financial derivatives establishes a verifiable history of an asset’s ownership and transaction lineage, crucial for regulatory compliance and risk mitigation.