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Rebalances

13min

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:

  1. Harvest Fees
  2. Rebalance Hedge
  3. 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:

  1. Calculates the new ETH/BTC exposure. 
  2. Calculates the collateral required to update the short position. 
  3. Executes the short position update.
Document image


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.
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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)







Updated 28 Mar 2023
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TABLE OF CONTENTS
Recurring Rebalances
Harvest Fee
Rebalance Hedge
Rebalance Profit
Trigger Rebalances
Delta Rebalance Trigger - 5%
Net Open Interest Trigger - 5% and 2hrs
Health Factor Check : 1.2
GLP Mint/Redeem Threshold : 5%