8min
Risk-On & Risk-Off Vault
How Did the Risk-On & Risk-Off Vaults Perform Historically?
Risk-On Vault
The Risk-On Vault indicates a stable yield of 15-25% APY.
We're improving the overall performance by hedging the current weights and trader open interest (OI) of ETH and BTC, while also implementing threshold-based rebalances. This strategy reduces hedge costs and variance in profit and loss (PnL).
Backtest 1 : Hedge 60% Long/Short OI)
- v1 : Mainnet Performance (Hedging Target Weights)
- v2 : Backtest Performance (Hedging Current Weights + Trader OI)
Improvements :
- 128% improvement total performance
- 40% reduction in trader PnL
- 45% reduction in delta PnL
- 55% reduction in hedge cost
- 95% reduction in mint/redeem cost
Backtest 2 : Hedge 100% Long OI, 60% Short OI
- v1 : Mainnet Performance (Hedging Target Weights)
- v2 : Backtest Performance (Hedging Current Weights + Trader OI)
Improvements:
- 295% improvement total performance
- 98% reduction in trader PnL
- 35% reduction in delta PnL
- 50% reduction in hedge cost
- 95% reduction in mint/redeem cost
Risk-Off Vault
The Risk-Off Vault yield is at 6-8% APY compared to the ~0.5% supply APY on Aave
The source of yield comes down to two components :
- Lending interest on Aave
- ETH yield split from GLP
