Portfolio Optimization Model
IL-Adjusted Expected Return
APR*: the risk-adjusted return of a strategy.
Expected_APR: The nominal yield of a strategy, including rewards, fees, and incentives.
Expected_IL: The expected impermanent loss, estimated using 30-day historical price data of the underlying asset pair.
μ (risk factor): A coefficient that controls how much IL is penalized relative to APR.
Interpretation of μ:
μ = 1 → IL is treated with equal weight to APR. If a pool has 10% yield and 5% IL, adjusted APR = 5%.
μ > 1 → IL is penalized more heavily. The strategy becomes more conservative, favoring stable yield sources.
μ < 1 → IL is penalized less. The strategy becomes more aggressive, prioritizing yield over IL protection.
This ensures that Prime Strategy can adapt to different risk tolerance levels, from conservative capital preservation to aggressive yield maximization.
Assets allocation process
Rank strategies by APR*
Start with the highest-ranked strategy.
Allocate as much as possible, limited by available liquidity.
Deduct the assets used.
Move to the next strategy in the ranking.
Continue until all assets are deployed or no strategies can be filled further.
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