Rebalances
The Risk On Vault manages two types of rebalances:
- Recurring Rebalances (once every 48hrs)
- Trigger Rebalances (triggered upon crossing a threshold)
Recurring Rebalances
During the 48hr recurring rebalance, we execute three operations:
- Harvest Fees
- Rebalance Hedge
- Rebalance Profit
Harvest Fee
ETH rewards accrued on the $GLP position are split between Risk On and Risk Off Vaults. The ETH rewards in the Risk On Vault are auto-compounded back into $GLP.
Note : 18.5% of the ETH rewards is paid as the protocol fee.
Rebalance Hedge
As the ETH/BTC exposure changes, the vault:
- Calculates the new ETH/BTC exposure.
- Calculates the collateral required to update the short position.
- Executes the short position update.
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.
Trigger Rebalances
In addition, to the recurring rebalances the vault also executes trigger based rebalances to isolate key risk parameters for our keeper's to manage.
Delta Rebalance Trigger - 5%
- Rebalance Condition: If current weights of ETH/BTC deviate by more than 5% from the delta hedge.
- Operation: Rebalance Hedge
- Effect: Minimizes the variance in the vault's delta spread.
Net Open Interest Trigger - 5% and 2hrs
- Rebalance Condition: If net open interest is at least 5% away from current OI hedge for 2hrs.
- Operation: Rebalance Hedge
- Effect: Reduces variance in trader PnL.
Health Factor Check : 1.2
- Rebalance Condition: If the health factor on Aave falls below 1.2
- Operation: Rebalance Hedge
- Effect: Keeps short positions sufficiently over-collateralized.
When this is triggered, both the current weight's and trader net OI hedge position are also updated.
GLP Mint/Redeem Threshold : 5%
- Rebalance Condition: If Aave PnL >= 5% of Risk On TVL
- Operation: Rebalance Profits
- Effect: Reduce GLP Mint/Redeem Costs (and overall hedge cost)
