Glossary of Terms
Investors should be familiar with the following key parameters of VETA structured products:
Underlying asset
The underlying assets for our products can include a variety of cryptocurrencies, such as BTC, ETH, and others.
Maturity
The maturity of the product varies from 7 days to 365 days.
Knock-out event
A knock-out event occurs if, on any observation day, the settlement price of the underlying asset exceeds the predetermined knock-out price. The product is terminated immediately, and the investor will get back the principal and the given knock-out income.
Knock-out observation day
Products with different maturities have different frequencies of knock-out observation days.
For example, if the product period is 180 days, the knock-out observation frequency is usually 30 days/time. The product period is 91 days/28 days, and the knock-out observation frequency is usually 7 days/time.
Knock-in event
The knock-in event occurs if the settlement price of the underlying asset is lower than the knock-in price in the real-time knock-in observation.
Knock-in observation day
Knock-in events are typically monitored continuously during the trading day.
Floor rate
In any case, your potential maximum loss is capped at a level determined by the floor rate (i.e., max loss = 1 - floor rate).
In the Snowball with Floor, after the knock-in occurs, if the settlement price of the target at maturity is lower than the initial price, the % of investor’s loss will be:
Put Strike Level
It helps to obtain stable income during the market turmoil period. When the market falls, it is equivalent to open a position at a discounted initial price. This allows investors to bear a lower loss.
For FCN and OTM Snowball products, the put strike level is determined by the ratio of the put strike price to the initial price. If the put strike level is 80%, the snowball has not been knocked out after knocking in and the due settlement price is greater than 80% of the initial price (that is, the put strike price), and the product has no loss; if the market falls sharply, the due settlement price is lower than the put strike price If the settlement price is lower than the put strike price, the investor will only bear the loss of the settlement price at maturity relative to the put strike price.
Knock-Out Participation Rate
Obtain the absolute income of part of the rising market in the market where the target has been rising continuously.
To participate in the snowball upwards, you will obtain a total income = knocked-out income + partial target increase income. If the knock-out observation day ends, the settlement price is the initial price * 115%, the knock-out price is the initial price * 105%, and the knock-out participation rate is 50%, then the total income = knock-out coupon + 50%* (115%-105%).
Non-Knock-Out Participation Rate
The non-knock-out participation rate allows for absolute gains in that portion of the underlying asset where it is up slightly (but not to the point of knocking out).
The non-knock-out participation rate needs to be considered in Booster, Shark Fin products, that is:
Total return = underlying up gain *non-knock-out participation rate.
Booster products, for example, if the knockout observation day product knockout end, the settlement price for the initial price * 104.9%, and lower than the knockout price, Booster participation rate of 225%, then the total return = 4.9% × 225% = 11.025%.
Oracle Price
Real-time market price data provided by a third party. VETA will use the oracle price to determine the real-time market value of the cryptocurrencies.
Collateral Factor
When a user deposits a digital currency as collateral, the credit granted is the market value of the cryptocurrencies multiplied by the corresponding collateral factor. Collateral Factor is used to control the risk caused by the fluctuation of the value of the collateral.
Liquidation Penalty
If you need to sell your pledged cryptocurrencies due to position liquidation, you need to pay VETA a liquidation penalty fee, usually 2%.
Initial Margin
Initial Margin is the margin that investors need to pay when they start to open a position in a product on the VETA platform. The amount of the initial margin will be determined according to the specific terms of the initial margin rate.
Margin Call
A margin call is a requirement by the VETA platform for investors to deposit additional funds into their account during the life of the product in order to maintain the required level. The amount of the margin call will be determined based on the price movement of the underlying asset, changes in the investor's risk value, and certain terms and conditions.
Risk Value
Risk Value is an assessment of a user's current risk level based on our model. A higher risk value means that the investor is at greater risk. If the risk value reaches 100%, the investor will face the risk of margin calls or forced closing of positions.
Risk Prediction
Risk Prediction is a sensitivity analysis. It reports the risk value at different price and day-to-maturity level. The panel will provide users with a reference for their risk management and asset allocation.
Last updated