Network Assumptions

Assumption

In cryptocurrency, options trading, and financial derivatives, network assumptions represent foundational beliefs about the underlying infrastructure and participant behavior. These assumptions, often implicit, govern the modeling of market dynamics and the valuation of complex instruments. For instance, a perpetual futures contract’s pricing model relies on an assumption of continuous arbitrage, ensuring the spot price and futures price remain aligned. Deviations from these assumptions, such as liquidity shocks or protocol vulnerabilities, can lead to significant pricing discrepancies and systemic risk.