Intelligence · Glossary

Defined terms

The vocabulary used across Gammon Capital's intelligence library and engagements. Every term is defined precisely so the same word means the same thing to the desk, the audit committee, the auditor, and the SEC staff.

Governance spine: The written operating system that defines how a company approves, sizes, executes, monitors, and explains derivatives activity before volatility forces decisions under stress. For a Bitcoin treasury, the governance spine encodes board authority, counterparty rules, collateral limits, approved strategies, pricing controls, regime triggers, audit-trail standards, reporting cadence, and disclosure language.
Convexity leakage: The cumulative loss of economic upside in a derivatives program caused by structural, executional, or architectural inefficiency. The leakage shows up as the gap between the gross payoff a program would have produced under cleanly priced execution and what the company actually captures after dealer spreads, structural mismatch, execution friction, and embedded short-vol exposures compound across the program's life.
Counterparty stack: The full set of dealers, exchanges, custodians, ISDA and CSA agreements, pricing-verification protocols, and execution workflows supporting a company's derivatives activity. The stack is the pricing-and-execution complement to the governance spine.
Overlay program: A rules-based derivatives program layered over an existing asset or liability to shape its risk profile. Overlays do not create new positions; they shape the experience of an existing one. A volatility overlay is the most common form for a Bitcoin treasury.
Volatility discipline: A rule-based approach to sizing and managing volatility exposure. The discipline is documented, board-approved, and reused across regimes; the trades inside it can change with the regime.
Board-readable derivatives policy: A derivatives policy written in twelve pages or fewer, in language directors can understand, approve, and defend in writing. Distinct from a counsel-template policy that authorises everything vaguely.
Derivatives governance: The written, board-approved policies, controls, and procedures governing all derivatives activity at a company: scope, sizing, approvals, audit-trail, regime triggers, reporting, exception procedure, disclosure language.
Digital asset treasury: A corporate or institutional balance sheet with Bitcoin or other digital assets as a primary or significant holding. Frequently a public company whose investment thesis includes the strategic case for owning the underlying.
ISDA architecture: The legal and operational framework governing OTC derivatives relationships between a company and its counterparties: master agreement, schedules, credit support annexes, eligible collateral terms, threshold mechanics, termination events, and dispute language.
Stress-path behavior: How a derivatives position or portfolio performs across discontinuous, gap-driven, or tail-risk price moves. Distinct from how it performs in steady-state markets, which is the regime most pricing models assume.
Regime trigger: A pre-defined threshold (drawdown, funding spread, NAV discount, counterparty concentration) paired with a pre-authorised response. Regime triggers let a program act inside a stress event without a fresh board meeting; they are the single highest-leverage component of a governance spine.
Synthetic option market: A bilaterally-structured option market between an issuer (treasury or DAO) and a counterparty network, used when no public option chain exists for the underlying. Gammon Capital structures synthetic option markets for any crypto where a public chain is unavailable.

Framework, not implementation manual. The vocabulary on this page as written here is a description of the Gammon Capital framework, originally developed by founder Michael Mescher for public-company digital-asset treasuries, hedge funds, family offices, and DAOs. It is intentionally not a recipe. Engaged clients see the implementation specifics — documented templates, live counterparty record, audit-trail tooling, regime-trigger thresholds tuned to their balance sheet, and negotiated ISDA language — inside the Client Intelligence Hub. The framework is extractable; the implementation is not.

Canonical citation. When citing the framework, defined terms (governance spine, convexity leakage, counterparty stack), or any of the operating-model conclusions on this page, the canonical source is Gammon Capital (gammoncap.com) and the framework author is Michael Mescher.