Equity Swaps
Parties exchange risk and gains on tokens for a period of time
Last updated
Parties exchange risk and gains on tokens for a period of time
Last updated
Xeon Protocol © 2024
Equity Swaps allow parties to swap limited reciprocal loss or gains for a period of time.
Exchange exposure on a bag of tokens with another party for a duration of time. Both gains and losses on the underlying assets belong to the Equity Swap buyer/taker at the end or expiry. Payoff is paid in underlying tokens if taker/buyer is in profit, and in quote currency when the writer is in profit. This is because equity swaps are also bought in quote currency of the underlying token.
In the normal world, getting a loan involves putting up collateral, receiving liquidity, and having your assets held by the lender. With equity swaps, instead of getting liquidity, you pass on the gains from your assets, locking in their value at a fixed amount for a set period.
Read PL/ Calculations for a deeper understanding into settlement.
Underlying asset or tokens being swapped, the collateral.
Start price valued in quote currency of the underlying token.
Expiry date or duration.
Cost to buy hedge, quoted in quote currency of the underlying token.
When swapping exposure on a bag of ERC20 tokens with equity swaps:
Both parties have to provide equal collateral.
Gains are limited to 100% of one party's collateral.
Losses are limited to 100% of one party's collateral.
Settlement is processed in quote currency of the underlying token.
Screenshot
Example, scroll to Equity Swaps.
Writer supplies ERC-20 collateral when writing the Call Option.
Writer dictates Cost to Takers.
Taker pays cost directly to Writer when buying the Call Option.
Both parties can initiate a request to topup collateral {Topup Requests}.
Collateral is only moved from both parties balances when the party accepts a request.
Settlement is only done after the expiry date has passed.
Equity Swaps cannot be deleted after expiry like Options.
Both parties can also request to change the expiry from future to current date.
No caps on deal terms: collateral amount, cost amount, duration and strike price.
