Free module · Crypto & decentralized finance
Crypto Derivatives: Carry, Funding and Liquidation
Reconcile contract units and collateral through the whole price path.
linear · inverse · dated basis · perpetual funding · margin · liquidation
The building blocks
Crypto derivatives separate exposure from ownership and add a collateral system. A hedge is complete only when its units, funding and cash path reconcile.
- Read payoff, multiplier, mark and settlement conventions.
- Account for basis, funding and fees separately.
- Replay margin and collateral stress before considering terminal results.
Lessons in this module
- Linear contract payoff and the multiplier
- Inverse contracts pay in the base asset
- Basis annualization and its limits
- Perpetual funding as actual cash flows
- Equity versus maintenance along a price path
- Solve a simplified liquidation boundary
- Collateral depegs and wrong-way exposure
- Reconcile the funded spot–perpetual hedge
Practice and apply
- Linear contract payoff and the multiplier — n=-10 contracts, m=.01 BTC/contract, entry $50000, exit $48000. Find gross P&L.
- Inverse contracts pay in the base asset — Long inverse face $10000, entry $50000/BTC, exit $55000/BTC. Find BTC P&L.
- Basis annualization and its limits — Spot 50000, future 51000, maturity 73 days. Find simple annualized basis fraction.
- Perpetual funding as actual cash flows — Short $10000 notional for three events with rates .001, -.0005, .0008. Find received net funding.
- Equity versus maintenance along a price path — Cash $1000, long .2 BTC, entry 50000, mark 46000, funding -20, fees 10. Find equity.
- Solve a simplified liquidation boundary — q=.2 BTC, entry 50000, cash 1000, m=.02, no fees/funding. Find simplified liquidation mark.
- Collateral depegs and wrong-way exposure — 10000 collateral tokens, stressed price $.90, haircut .10. Find eligible dollars.
- Reconcile the funded spot–perpetual hedge — .1 BTC spot 50000→52000 and short perp 50500→52100; funding +13; financing 20; fees 8. Find net USD profit.
Work through the practice exercises · Quant development tools