Crypto Uncorrelated Returns

Published on: 04.01.2023

Crypto Uncorrelated Returns, what does it means? Rysk provides products that will produce uncorrelated, competitive yields in all market conditions, unlike most token-emission-based yield farms.

Furthermore, Rysk relies on pure financial engineering! Rysk’s users can access high yields with clear transparency on the risks they are taking. The platform aims to help accelerate DeFi risk maturity whilst furthering the appreciation and adoption of real yield.

Dynamic Hedging Vault (DHV)

In addition, Delta is the sensitivity of the value of a derivative (or a portfolio consisting of derivatives) with respect to an underlying asset price movement. A portfolio with a high, positive ETH delta exposure will see its value quickly rise as the price of ETH rises.

Inversely, a high, negative ETH delta exposure will result in losses if ETH appreciates but gains if ETH depreciates. A low delta exposure means that a portfolio’s value is not affected much by price movements.

Dynamic (Delta) Hedging is an options strategy that aims to reduce the directional risk associated with price movements in the underlying asset. This can be done by buying or selling options, purchasing the underlying asset in spot markets, or using other derivatives such as futures/perpetual to ensure a delta of 0.

For example, one could purchase a call option with a delta of 0.4 as well as a put option with a delta of -0.4. The sum of the individual deltas (0) is the total delta exposure of this simple portfolio. The portfolio is delta-neutral.

The Strategy

Furthermore, the DHV will act as a permissionless vanilla option AMM. Allowing anyone to buy from the vault (or sell to the vault) options at a range of strike prices and expiries. At all times the DHV will be aware of its own position. It also includes its delta exposure and will price its options in such a way as to incentivize the sale/purchase of options that bring the DHV’s delta exposure closer to 0. For example, if demand for calls outstrips that for puts. The vault will automatically increase the price of calls and reduce the price for puts, incentivizing a market-driven rebalancing of the book’s delta.

Rysk Alpha

In Rysk Alpha, the protocol is design to verify that users want uncorrelated returns. The models work and the risk management infrastructure is sound. Therefore, instead of a permissionless AMM, the DHV will effectively behave like a desk.

It will start by selling a delta-neutral structure product to a counterparty and hedge using all tools that the product has access to, which currently includes perpetual via Rage trade and spot via Uniswap. In the future, we intend to integrate more derivative providers to access more hedging opportunities that might be more cost-effective. In the next phase, Rysk Beyond will activate the fully automated trading described above.