April 2026
Intermediate
288 pages
9h 2m
English
Content preview from Financial Mathematics for Cryptocurrencies
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CHAPTER 15Cross-chain Asset Pricing
15.1 ON-OFF-CHAIN PRICING
Discounting for digital assets linked to off-chain payoffs, and vice versa, is a direct application of change of numéraire. It shares methodological and conceptual similarities with FX products in TradFi [324, 325], and in particular the carry trade, which we discuss in Section 6.2.
The idea of the carry trade is to take advantage of an interest rate differential. In TradFi, this is done by borrowing in a currency with a low interest rate and lending in another with a higher interest rate. In DeFi, this can be done by borrowing off-chain and lending on-chain, or vice versa.
Several stochastic processes are involved:
- The off-chain discounting (short) rate
- The on-chain discounting ...
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