Vault Tranche
Amphor protocol is pleased to collaborate with Idle Finance to integrate the tranche mechanism within its vault offering an exposure to both risk-seeker and risk-averse users.
Traditionally, tranches represent a specific split on a given asset characterized by its own yield, risk and duration. The tranche mechanism is an effective way to provide users with different levels of asset exposure based on their respective risk tolerance and objectives.
To achieve this goal, Amphor vaults are composed of two distinct classes of tranches: Junior & Senior.
Senior Tranches (ST): provide capital protection on Amphor ETH vault deposits thanks to coverage given by Junior Tranche.
Junior Tranches (JT): provide higher rewards on Amphor ETH vault deposits by carrying a higher grade of risks and protecting Senior Tranche.
The representation of Amphor ETH vault incorporating the yield tranche system can be visualized as follows, assuming the following split:
Standard vault = 50% | Senior tranche = 37.5% | Junior Tranche = 12.5%
Payoff of Yield Tranches
The payoff and characteristics of each tranche can be conceptualized as follows
Assumptions:
Amphor ETH Vault TVL: $2M (standard $1M + Jr/Sr Tranche $1M)
Net APR: 20%
Senior Tranche = 3x Junior Tranche
Additional considerations:
Users can freely choose their vault exposure: standard and/or Sr/Jr tranche.
Users have the option to change their vault exposure over the time
The ratio of Sr/Jr tranche can vary over the time
Yield Tranches Simulator
Idle Finance has created a public simulator in order to gauge the expected Junior APY (with boost) and the Senior coverage APY (with coverage) by plugin custom data.
The simulator is accessible here.
Adaptive Yield Split feature
The adaptive yield split (AYS) is the mechanism that dynamically computes the APY split between Senior and Junior Tranches. The AYS mechanism is conditional to the liquidity deposited on each tranche side and lead to the following tranche profiles:
Senior Tranche receives most of the underlying yield when liquidity is low on the Junior side (i.e. low coverage on Senior funds), or receives a guaranteed minimum portion of the underlying yield when Junior liquidity is high (i.e. high coverage on Senior funds);
Junior Tranche receives outperforming APRs on the Junior Tranches, no matter what the amount of deposited liquidity on the Senior is (assuming Senior Tranche ≥ 1).
a) Liquidity ratios
b) Senior and Junior Tranche Yields
where the Base APR is the underlying strategy yield, and the Yield share of the Senior side is conditional to the liquidity on the Senior tranche:
c) Senior Coverage and Junior Outperformance
The funds coverage ratio (Senior Tranche) provided by the Junior tranche is calculated by the relative liquidity inside the two tranches:
The relative outperformance of the Junior tranche versus base vault strategy is calculated as follows:
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