Operations
Rebalance Function
To account for changes in ETH and BTC proportions in the GLP pool and trader OI, the vault updates its hedge position during each rebalance. The Risk-On Vault manages its hedge position by performing these functions every 48 hours.
- Harvest Fees
- Rebalance Hedge
- Rebalance Profit
Harvest Fee
Based on the Risk-Off Vault's utilisation ratio, the ETH rewards accrued from GMX, since the previous rebalance, is split between the Risk-On and Risk-Off Vault.
The Risk-On Vault’s share of ETH rewards is converted into GLP tokens which gives a boost in yield from auto-compounding.
The Risk-Off Vault’s share of ETH rewards is converted into USDC and staked on Aave for the Risk-Off Vault to earn the supply interest.
Note : 18.5% of the ETH rewards is paid as the protocol fee.
Rebalance Hedge
As the ETH & BTC weights in the GLP pool and the trader OI changes, the Risk-On Vault:
- Calculates the current token exposure in GLP and the trader OI.
- Gets the collateral required to update the short position.
- Updates the short position on Aave every 48 hours
Rebalance Profit
As the ETH & BTC prices change, short positions on Aave incur some PnL. This PnL is settled against the Risk-on vault's assets by minting/redeeming GLP.
- When prices decrease, profits from the short position are used to mint GLP.
- When prices increase, losses on the short position are offset by redeeming GLP.
This function is executed only if the GLP Mint/Redeem Threshold is breached.
Additional Checks :
We’ve also added additional checks in place that handle threshold/trigger based rebalances between the 48hr rebalances.
Delta Rebalance Trigger : 5%
- Hedge for the current weights is updated if the deviation between the GLP's current weights and Rage's hedged weights is more than 5%.
- This reduces the Delta PnL variance
When this is triggered, only the current weight's hedge position is updated.
Trader OI Rebalance Trigger : 5% for 2hrs
- A rebalance is triggered if the difference between the GLP's current trader OI and the Rage's trader OI hedge exceeds 5% of the Risk-on Vault's TVL and persists for more than 2 hours.
- This reduces the trader PnL Variance
- Partial Trader PnL Hedge : 60%
- Trader OI Delta Trigger : 5%
- Trader OI Time Trigger : 2hrs
When this is triggered, both the current weight's and trader OI's hedge position are updated.
Health Factor Check : 1.2
A rebalance is triggered if the health factor on Aave falls below 1.2.
When this is triggered, both the current weight's and trader OI's hedge position are updated.
Also, the Rebalance Profit function is executed.
GLP Mint/Redeem Threshold : 5%
- The PnL earned from the Aave short position will only be settled against the GLP collateral if it is greater than 5% of the Risk-on TVL.
- This reduces the GLP Mint/Redeem Costs
When this is triggered, Rebalance Profit function is executed.
