A zero-coupon bond, adapted to the crypto finance context, is a debt instrument that does not pay periodic interest (coupons) but is instead sold at a discount to its face value. The investor receives the full face value at maturity, with the difference between the purchase price and the face value representing the return. In crypto, this concept can be mirrored by certain DeFi protocols or token structures offering discounted future payouts.
Mechanism
In traditional finance, the mechanism is straightforward: an investor purchases the bond below par, and at maturity, the issuer repays the par value. In crypto, this could manifest as a smart contract where a certain amount of a token is locked today to receive a larger, predefined amount of the same or a different token at a future date, without intermittent rewards. This structure simplifies yield calculation to a single future payment.
Methodology
The methodology for valuing and utilizing zero-coupon bonds, or their crypto analogues, involves discounting the future face value back to the present using an appropriate yield or interest rate. Investors use these instruments for precise future capital planning, hedging, or as components in more complex structured products. This approach provides a clear, single-payment return profile, offering a distinct option within the broader digital asset investing landscape for managing duration and liquidity.
Crypto structured notes enable the construction of precise, conditional bearish exposures by embedding derivative payloads within a debt instrument chassis.
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