Strategy Payoff
The goal of the strategy is to as accurately as possible anticipate the fluctuations of an underlying asset within a specific range over a given duration. The anticipation of an asset value is based on quantitative models used in traditional finance. As long as the underlying asset trades within the set boundaries (between the lower and upper bands), the strategy produces a fixed yield accrued daily, which is paid to the users at maturity.
Strategy rationale
A synthetic LP IL-hedged bullish bias expects the underlying to stay above the lower band (risk threshold). The faster the underlying price reaches the higher band, the sooner the position settles.
A synthetic LP IL-hedged bearish bias expects the underlying to stay below the higher band (risk threshold). The faster the underlying price reaches the lower band, the sooner the position settles.
The Early Termination (ET) Level is set in advance for each week of the epoch, representing a price threshold that triggers an early termination event if the price is above the ET level (bullish bias) or below the ET level (bearish bias) on the Observation date.
A synthetic LP IL-hedged vault is short volatility on either BTC or ETH underlying for a specific time frame (short gamma). Depending on the implied volatility of BTC/USD and ETH/USD, the underlying assets may change from one Epoch to another, seeking the best yield between the two pairs (best-of-both).
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Early termination
If the asset trades above the upper band in the strategy with bullish bias (or below the lower band with bearish bias), the principal and accrued coupons will be paid back, but the product might stop at a predefined date.
Risk threshold
If the asset trades below the lower band in the bullish bias strategy (above the upper band in the bearish bias), coupons are not generated and the strategy can be restructured based on the market parameters. If the strategy reaches maturity below the risk threshold, users can incur losses on deposited funds.
Reference rate used in Amphor.io UI
The ETH price displayed on the UI derives from Chainlink Oracle lib (ETH Last price).
The BTC price displayed on the UI derives from Chainlink Oracle lib (BTC Last price).
Reference rate used for the Weekly Observation
The reference rates used for the weekly observation are based on a TWAP of the CF Benchmarks:
ETH: ETHUSD_BRR benchmark
BTC: BTCUSD_BRR benchmark
Maximal loss exposure
Leverage is limited up to x2.5 (x3 post-restructuration)
Maturity is limited up to 6 weeks (8 weeks post-restructuration)
The Amphor Simulator below allows to run various scenarios based on specific parameters in order to assess the payout:
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Examples of possible scenarios (assuming 4 weeks epoch)
Restructuration: If the reference price goes out of the range on the last observation date or near contract maturity, the position would be restructured to protect the principal against realized loss. Restructuration reduces APR and/or extends epoch duration and/or flips the bias in exchange for widening the price range of the product prior to contract settlement.
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