In line with an official ‘press-release‘ published, Hong Kong-based renowned cryptocurrency trading firm named ‘GSR’ disclosed the launch of crypto variance swaps, a product for hedging against volatility.
According to the GSR announcement, the variance swaps will permit investors, traders, businesses as well as other alternative crypto portfolio holders to hedge against cryptocurrency volatility. In line with ‘Investopedia‘, a financial swap is a financial derivative used to speculate on the volatility of an asset.
The ‘launch‘ of Bitcoin [BTC] and Ethereum [ETH] variance swaps claims that the derivative is the simplest path to induce exposure to the volatility of the underlying assets. The contracts are on annualized variance or annualized volatility squared.
The GSR derivative permits users to trade the difference between a price set upfront along with the variance realised via the duration of the swap. The firm explains that ways to obtain a similar impact through the employment of vanilla options [puts and calls] exist, however they’re far more labor intensive since they have to be actively managed and timely rebalanced so as to hedge.
Moreover, the GSR announcement claims that GSR successfully traded and managed billions of dollars priced digital assets via their software.
An other derivative, XRP-based exchange traded product, has been ‘launched’ on Switzerland’s leading stock exchange named ‘SIX’.