Same-Side Rebalancing

Once the trade has been made, we have a credit and a debit to allocate between Pool and Reserve on both the asset and capital sides.

ASSET SAME-SIDE REBALANCING

Available ETH for the Asset side should attempt to fully satisfy LR1 first. Any remaining assets should be credited to the AR.

CAPITAL SAME-SIDE REBALANCING

Capital-side rebalancing considers the current state of Market Yield by computing a new value, Psi. We use the value of Psi to split capital between Capital Pool and Capital Reserve.

SHORTFALL (Psi)

When the Capital Pool reduces past the value of the Debt beyond a given threshold, the Capital Reserve starts to assist in covering further Taker Claims based on how much of the Reserve has been utilised.

The proportion contributed by the Capital Reserve to outgoing capital (e.g. from rebalancing or from the payment of Taker Claims), , increases with increasing Shortfall. In rebalancing, we then set the proportion of total capital in the Capital Reserve according to:

$\Psi: \text{[ratio]}: \frac{E(\text{Capital}) + \text{diff}_{\text{USD}} - E(\text{Liability}) + CR - L \cdot r_{12}}{\lambda_{\text{RESERVE-GAP}} \cdot D} \leq 1$ $0 < \psi < 1$