DeFi
Structured Products
Structured product protocols access SVI-calibrated volatility surfaces for pricing complex on-chain payoffs — covered calls, principal-protected vaults, and barrier options. Arbitrage-free surfaces across the full strike-expiry grid ensure institutional-grade accuracy for DeFi structured product vaults.
DeFi structured product protocols offer depositors exposure to options strategies — covered calls, principal-protected vaults, barrier options, and more exotic payoffs. The depositor provides capital, the protocol executes the strategy, and the yield depends on how accurately the options are priced at entry.
If the protocol overpays for options, depositor yields shrink. If it underprices the options it sells, the vault takes on uncompensated risk. The difference between a vault that delivers consistent yield and one that bleeds value is the quality of the volatility surface it prices against.
Structured products involve specific strikes — a covered call sold at 110% of spot, a put protection bought at 90%. The IV at these strikes is what determines the premium collected or paid. ATM IV alone doesn’t capture how the smile shapes pricing at these out-of-the-money levels. A vault selling covered calls needs the IV at its exact strike, not an approximation extrapolated from ATM.
Vault epochs don’t always align with listed expiries. A 7-day vault epoch might sit between a 5-day and 14-day listed expiry. Interpolating between listed tenors using a raw average misses the curvature of the term structure. SVI-calibrated surfaces provide IV at any arbitrary tenor, matching the vault’s exact epoch length.
A structured product that combines multiple legs — for example a collar (long put + short call) — needs IV values across different strikes that are internally consistent. If the put IV and call IV don’t come from the same arbitrage-free surface, the spread between them may contain phantom edge that doesn’t exist in the market. SVI parameterisation enforces no-arbitrage constraints across the entire strike-expiry grid.
Depositors hold the underlying while the vault sells OTM calls. Yield comes from the premium collected. Pricing the call correctly determines whether the vault is being fairly compensated for the upside it’s giving up. Underpricing means the vault is selling optionality too cheaply — depositors earn less than they should.
A portion of the deposit earns yield (lending, staking), while the yield is used to buy options for upside exposure. The cost of the options — determined by IV at the chosen strike and tenor — dictates how much upside exposure the vault can afford. Accurate IV surfaces mean more efficient capital allocation between the yield component and the options component.
Knock-in or knock-out payoffs that activate or deactivate at specific price levels. Pricing these requires IV not just at the strike but at the barrier level too — and the correlation between the two across time. A surface with full moneyness coverage provides both data points from the same calibrated model.
Structured product protocols operating on-chain consume vol surface data through push-based or pull-based oracle delivery. Smart contracts can price any option, on any point of the smile — all on-chain. Every data point carries an EIP712 signature for cryptographic verification, ensuring the pricing inputs the vault relies on are authentic and unaltered.
Calibrated surfaces are available across BTC, ETH, SOL, XRP, HYPE, ADA, SUI, and additional assets as the universe expands. Both composite and exchange-specific surfaces support pricing across venues. Historical surfaces are available for backtesting vault strategy performance across multiple market regimes before deploying depositor capital.
