> For the complete documentation index, see [llms.txt](https://docs.marquee.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.marquee.fi/protocol/pricing-model.md).
# Pricing Model
**Crypto Price Cover Pricing Model**
Since insurance is in effect options and hence, the insurance premium can be calculated using Monte Carlo method. In the risk-free environment, suppose the underlying asset price follows geometric Brownian motion:
In the discrete-time form, μ is the expected return, and σ is its standard deviation and follows a standard normal distribution.Following the Taylor expansion, we can find the price path of the insurance premium:
Since
We have
Where μ = r is the risk-free rate, σ is the yearly standard deviation of the underlying asset's return, and T - t is the time to maturity,is the price of the underlying asset at period t. The key variable that controlsiswhich can be obtained by samplingand simulating the price path of the underlying asset. This allows us to calculate the insurance premium.
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