Synthetic Recession Probability - usRP
Last updated
Last updated
One of the most damaging events to befall a portfolio is an unforeseen recession. Therefore, following suit with our eTY and eITY products, we are introducing a tokenized measure of recession-based risk. Initially, this mintable asset will reflect the risks associated with the United States’ Economy - given its influence over the global markets. However, as our platform grows, we will introduce other country-based recession risk measures as well.
Risk will not only be calculated based of a conglomeration of analyst reflections, but will also utilize several machine learning algorithms which factor in overall market and global sentiments; these which will be cross-weighted not only quarterly, but also day-to-day to reflect ever changing shifts in geopolitical inputs. Each position will cost $1 worth of ISA per percentage point of assigned risk. For example, if there is a 6% chance of a recession, each unit of hedge will cost $6 worth of ISA. Once purchased, usRP will automatically be entered into a lending pool to allow for short-selling. Like options, establishing a short position against this percentage risk of recession requires collateral. This collateral is set at a rate of $100 per unit short minus the current unit cost - the max inherent risk allotment at 100% chance of a recession - which will be backed by sRHO. Short-sellers will also pay interest to the pooled long usRP at a daily interest rate of 0.1% per day - which will be paid for in sRHO. This daily interest will be calculated at the time of establishing the short by entering the maximum number of days you will be short for. Once the time limit is up - the short contract will expire and the short closed. If usRP is below the price when the short was initiated, the aggregated long pool of usRP will pay the unit count worth of usRP profit to the now closed short holder. The time interest the short paid to the collected pool of longs will then be distributed to the longs proportional to their positional unit count. However, the interest will only be paid to the long holders that were in the pool at the time the short was established. If a short-seller chooses to close out their position at a loss, the collateral lost will be divided among all long usRP holders that were in the pool at the time the short was established. If the short-seller closes out their position at a profit, the percentage of the profit will be divided amongst all long-holders and the appropriate units will be transferred to the short-seller as profit. They are then able to bond the usRP with USDC.e and sell it to the Treasury or swap it with the available liquidity. A maximum of 10,000 units of usRP will be allowed to be minted per day at this time with a 2.5% mint fee. Future swaps will carry a 0.5% swap fee.
Shorting above the total float of usRP in the lending pool is prohibited.
