Intro to Derivatives

Hxro core contributors built protocols that provide the necessary functions to facilitate both the trading and risk management of various derivatives contract markets. Derivatives are a specific type of financial contract that derive their value from one or more underlying assets or benchmarks. The most common underlying assets for derivatives contracts traditionally include commodities such as crude oil, corn, and gold, as well as currencies. These transactions are generally agreements between two or more parties that can trade either on exchange or OTC (over-the-counter).
Derivatives contracts allow traders to express an opinion about a particular market by taking speculative positions. They are essential for the overall efficiency of capital markets as they facilitate price discovery, risk management, and market liquidity. They also enable speculation and investment, support portfolio diversification, and create arbitrage opportunities. Hxro Network protocols are currently designed to support a wide variety of derivatives contracts including (but not limited to):
  • Futures - Perpetual futures and expiring futures
  • Standardized Options - European call and put options. These are options that you most commonly see on a traditional options exchange.
  • Exotic Options - Non-standard options that vary in their payoff structure, exercise terms, and other contract components. Examples of exotics include One-Touch, Barrier, Knock-Out, Range and Bermudian options