Narrow Spread with Dynamic Risk Premium
Last updated
Last updated
SLE provides Moby with real-time, market-synced data for accurate options pricing, setting it apart from traditional AMM models
Moby's real-time pricing capability offers a competitive edge, reducing the need for thick spreads (Risk Premium) typically used by AMMs to mitigate volatility risks affecting LPs
For more information on how SLE works, please read:
Backed by SLE, the Dynamic Risk Premium Model applies Risk Premium at levels as low as 10% of the benchmark value for transactions that reduce any of the Greeks Risk for OLPs on a real-time basis
The Dynamic Risk Premium Model, calibrated to match CEXs' Risk Premium as a benchmark, enables Moby to offer spreads narrower than those of leading CEXs for 50 - 80% of the trades
Assuming there's no Dynamic Risk Premium, an OLP would need to charge Risk Premiums for Delta, Theta, and Vega at $2, $3, and $5, respectively, and $10 collectively to execute a certain options position
However, if this position reduces Moby’s OLP Delta and Theta risks, the actual Risk Premium charged, with the application of the Dynamic Risk Premium, would only be $5.5 ($2 * 10% + $3 * 10% + $5 * 100%), significantly lowering the cost for traders and improving market accessibility