Discrete Monitoring Risk

Discrete monitoring risk arises when a barrier or trigger condition in a derivative contract is only checked at specific intervals rather than continuously. This creates a potential for the asset price to cross the barrier between monitoring points without triggering the event, or conversely, for the price to be at the barrier at the moment of check but not otherwise.

In crypto-derivative protocols, monitoring is often tied to block times, which introduces latency and technical risk. Pricing models must adjust for the probability that the barrier event is missed or incorrectly captured due to the discrete nature of the data collection.

This risk is a key consideration for developers building automated vault strategies that rely on price-based triggers.