Skip to main content

What Are the Key Inputs a Market Maker Uses to Construct Their Initial IV Surface for a New Crypto Option?

Key inputs include the spot price of the underlying crypto asset, the risk-free rate (often approximated by lending rates), the dividend yield (or a crypto equivalent like staking yield), and most importantly, historical volatility data and current market expectations. For a new option, the surface is often bootstrapped from existing, more liquid options with similar characteristics.

Do Centralized Exchanges Have an Equivalent to MEV Searchers and Validators?
Which ‘Greek’ Is Directly Influenced by the Risk-Free Interest Rate Assumption in Black-Scholes?
What Is the VIX Equivalent for Cryptocurrency Markets?
What Is the Significance of the Risk-Free Interest Rate in the Black-Scholes Model?