Yield farming or liquidity mining have been at the core of the recent boom of DeFi protocols. From a trading perspective, yield-generating strategies are producing incredibly attractive returns compared to similar strategies traditional capital markets. How to build yield-generating DeFi strategies that correctly balance risk-rewards?
This session discusses the new world of DeFi quant yield-generating strategies. We discuss key building blocks required to implement intelligent DeFi quant strategies in an institutional-grade manner. The session will discuss how to think about elements such as risk quantification, back testing , simulations , protocol interactions and many others in the context of DeFi yield-generating strategies.
2. Agenda
● A DeFi perspective of yield-generating strategies
● Building institutional-grade yield generating strategies in DeFi
● How to think about risk
● Examples
13. The history of financial markets is the history of the
debt and yield…
14. Yield generating strategies are typically associated
with passive models in fixed-income or equities
markets…
15. In recent years quant models made inroads into yield
generating strategies…
16. Main Trends
Smart-Beta Methods
• Generate higher yields applying factor-investment
models to fixed income portfolios
Yield-Based Options
• Model calls and puts based on the yield of specific
securities
High Yield ETFs
• Develop baskets of high-dividend paying equities
33. Some Key Points About Building Quant DeFi Yield-
Generating Strategies
Rapid experimentation is key
Yield-Generation is happening outside Ethereum
Enable exposure to multiple protocols and crypto-assets
Infrastructure is key
Risk as a first-class component
34. Anyone can run 1-2 yield-generating strategies with
small capacity but running at scale requires
infrastructure….
38. Some Key Points About Building Quant DeFi Yield-
Generating Strategies
Intrinsic
Protocol Risk
Exogenous
Protocol Risks
Other Risk
Factors
• Liquidations
• Imbalances
• …
• Hacks
• Forks
• …
• Asset manipulations
• Centralized control
• ….
39. Summary
● DeFi offers a new playground for quant yield generating strategies
● Building institutional-grade DeFi yield generating strategies require infrastructure
● Risk management should be a key building block of institutional-grade DeFi yield
generating strategies