Rapid Extrinsic Value Decay AVAX | REVDA
Last updated
Last updated
REVDA - Rapid Extrinsic Value Decay AVAX - Seeks to track notional value against extrinsic value implications in AVAX pricing. It is the second derivative of the change in expected future value vs current value. A widening spread between expected value and current value equates to a positive move on REVDA. A tightening spread between expected value and current value equates to a negative move on REVDA. An additional small value between MoM and DoD correlation changes has been added to bake in to allow for broader long-term trends to form during periods of sustained market moves. As such, it can act as a shorter to mid-term trading tool based on portfolio bias of the aforementioned.
Mints start at 10 USD worth of ISA and will theoretically trade as a summation of the aforementioned change in ratios. The wider the spread between expected and current value, the more sensitive REVDA is towards positive moves. The lower the correlation, the less sensitive the asset trades. Over time - the range will rise or fall based on the relationship between the two, but the bias representation will remain consistent.
Like all collateralized products on our platform, sRho is used to secure the short position. REVDA utilizes a 2:1 collateral ratio to secure the position. A 2.5% mint fee is required to mint REVDA - with the minter receiving sREVDA in return as a receipt.
A 2.5% fee applies to swapping sREVDA. sREVDA can be bonded and sold to the Treasury. Short-sellers will also pay interest to the pooled long sREVDA at a daily interest rate of 0.2% 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 REVDA is below the price when the short was initiated, the aggregated long pool of REVDA will pay the unit count worth of 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 sREVDA unit 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 sREVDA and the appropriate sREVDA units will be transferred to the short-seller as profit.
Shorting above the total float of REVDA in the lending pool is prohibited.
