Yizhou Cao, Min Dai, Steven Kou, Lewei Li, Chen Yang
{"title":"Designing stablecoins","authors":"Yizhou Cao, Min Dai, Steven Kou, Lewei Li, Chen Yang","doi":"10.1111/mafi.12445","DOIUrl":null,"url":null,"abstract":"Existing cryptocurrencies are too volatile to be used as currencies for daily payments. Stablecoins, which are cryptocurrencies pegged to other stable financial assets such as the US dollar, are desirable for payments within blockchain networks, whereby being often called the “Holy Grail of cryptocurrency.” By using the option pricing theory and the Ethereum platform that allows running smart contracts, we design several dual‐class structures that are written on the ETH cryptocurrency and offer a fixed‐income crypto asset (Class A coin), a stablecoin (Class A′ coin) pegged to a traditional currency, and leveraged investment instruments (Class B and B′ coins). Our investigation of the values of stablecoins in the presence of jump risk and black swan‐type events shows the robustness of the design. The design has been implemented on the Ethereum platform.","PeriodicalId":49867,"journal":{"name":"Mathematical Finance","volume":null,"pages":null},"PeriodicalIF":1.6000,"publicationDate":"2024-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Mathematical Finance","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1111/mafi.12445","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Existing cryptocurrencies are too volatile to be used as currencies for daily payments. Stablecoins, which are cryptocurrencies pegged to other stable financial assets such as the US dollar, are desirable for payments within blockchain networks, whereby being often called the “Holy Grail of cryptocurrency.” By using the option pricing theory and the Ethereum platform that allows running smart contracts, we design several dual‐class structures that are written on the ETH cryptocurrency and offer a fixed‐income crypto asset (Class A coin), a stablecoin (Class A′ coin) pegged to a traditional currency, and leveraged investment instruments (Class B and B′ coins). Our investigation of the values of stablecoins in the presence of jump risk and black swan‐type events shows the robustness of the design. The design has been implemented on the Ethereum platform.
期刊介绍：
Mathematical Finance seeks to publish original research articles focused on the development and application of novel mathematical and statistical methods for the analysis of financial problems.
The journal welcomes contributions on new statistical methods for the analysis of financial problems. Empirical results will be appropriate to the extent that they illustrate a statistical technique, validate a model or provide insight into a financial problem. Papers whose main contribution rests on empirical results derived with standard approaches will not be considered.
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