Barrier Options

What are barrier options?

Barrier options are standard vanilla options with barrier levels where the options become live (knock-in barrier) or worthless (knock-out barrier) when the underlying asset crosses the barriers.

The barrier options available at the launch of ClearDAO are knock-out barrier options. They are cheaper than their vanilla counterparts.

How are barrier option prices calculated on the ClearDAO platform?

The fair value of the option is first calculated off-chain using QuantLib open source library. This fair value is then passed onto the blockchain where we use a modified vAMM algorithm to introduce slippage to get at the final option price

How is the underlying index price calculated?

For underlying indices that consist of only fungible tokens, we use oracle feeds from Chainlink, Coinbase, and Band.

For NFT collection indices, we take into account all historical traded prices and give higher weight to the more recent trades to get at a single price for each NFT. Then we simple weigh the prices of these NFTs to get at the collection index price