Designing Stable Coins by Professor Steven Kou

Stable coins, which are cryptocurrencies pegged to other stable financial assets such as U.S. dollar, are desirable for payments within blockchain networks, whereby being often called the Holy Grail of cryptocurrency." However, existing cryptocurrencies are too volatile for these purposes. By using the option pricing theory, we design several dual-class structures that generated income stable coins (class A and A0 coins) pegged to a traditional currency as well as leveraged investment instruments (class B and B0 coins). When combined with insurance from a government, the design can also serve as a basis for issuing a sovereign cryptocurrency.

Professor Steven Kou is a Questrom Professor in Management and Professor of Finance at Boston University. Previously, he taught at National University of Singapore (from 2013 to 2018), Columbia University (from 1998 to 2014), University of Michigan (1996-1998), and Rutgers University (1995-1996). He teaches courses in FinTech and quantitative finance. He is a fellow of the Institute of Mathematical Statistics and won the Erlang Prize from INFORMS in 2002. Some of his research results have been incorporated into standard MBA textbooks and have been implemented in commercial software packages and terminals, e.g. in Bloomberg Terminals.

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