What Is the Advantage of a “Quanto” Future Contract in Managing Collateral Risk?
A quanto future contract is a derivative where the underlying asset is denominated in one currency (e.g. BTC) but is settled in another currency (e.g.
USD, often via a stablecoin). The key advantage is that it eliminates the exchange rate risk between the underlying asset and the settlement currency.
Traders can speculate on the price movement of BTC without having to hold BTC as collateral, thus isolating the collateral risk to the stability of the settlement stablecoin.
