Data Feeds and Pricing

This document describes the external data feeds Kyan relies on for price discovery and volatility modeling. It explains how Chainlink and Block Scholes data are integrated into Kyan’s pricing system, and how the Black–Scholes model is extended with SVI parameters to construct a realistic implied volatility (IV) surface.

Summary

Quick reference for integration and usage:

Chainlink Feeds

• Kyan integrates Chainlink oracles for BTC, ETH, and ARB.
• Chainlink provides an index price, which is transformed into a mark price on Kyan.
• The mark price is critical for:
  • Liquidation thresholds
  • Order trigger conditions

This ensures the protocol maintains fair and tamper-resistant pricing for core risk management functions.

Block Scholes Feeds

• Kyan uses Block Scholes as the source of implied volatility (IV) data.
• The feed provides SVI (Stochastic Volatility Inspired) parameters, which are necessary to construct the volatility surface.
• These parameters allow Kyan to account for the volatility smile/skew across strikes and maturities.

Black–Scholes Integration

Kyan’s pricing stack combines the classical Black–Scholes model with Block Scholes’ SVI feed:

1. Baseline Model:

   • Standard Black–Scholes produces a theoretical option price from a single IV input.
   • This creates a “flat” surface — insufficient for real-world trading.

2. SVI Parameters:

   • Block Scholes provides the parameters controlling the smile:
     • a — overall level
     • b — slope scaling
     • ρ — correlation / skew
     • m — moneyness offset
     • σ — curve / roundness
   • The feed also provides T (time to expiry), and rho (risk-free interest rate).

3. Surface Construction:

   • Parameters are combined with Black–Scholes to generate an IV surface across strikes and maturities.
   • Each expiry has a unique set of IVs, enabling realistic pricing.

Practical Flow

1. Fetch index prices from Chainlink.
2. Construct mark price for liquidation/order logic.
3. Fetch SVI parameters from Block Scholes.
4. Use Black–Scholes engine with SVI input to reconstruct the implied volatility surface.
5. Derive option prices for all strikes/maturities.

graph TD
  A[Chainlink Index Price] --> B[Mark Price Engine]
  B --> C[Risk controls - liquidation thresholds, order triggers]

  A --> D[Spot S for pricing]
  E[Block Scholes SVI params] --> F[IV surface builder]
  F --> G[Black-Scholes]
  D --> G
  G --> H[Option prices - all strikes, maturities]

  classDef data fill:#eef,stroke:#99f,stroke-width:1px;
  classDef compute fill:#efe,stroke:#9c9,stroke-width:1px;
  classDef output fill:#fee,stroke:#f99,stroke-width:1px;

  class A,E data
  class B,D,F,G compute
  class C,H output