Assessing Leveraged Yield Position

Case1) Borrow $35 USDT against $100 stTON-USDT LP token

• parameter

  • Risk Factor : TON - 40%, USDT - 0%, LST - 5%, LP - 5%

  • MaxRiskRatio : 80%, MaxLeverage : 300%

Asset	Supply	Borrow	Net Asset	Risk Value
DeFi position (A = a1+a2)	-	-	-	-
DEX (a1)	$100	-	$100	$5
Liquid Staking (a2)	$50	-	$50	$2.5
TON (B = b1 + b2)	$50	-	$50	$20
Native (b1)	-	-	-	-
DeFi position (b2, from A)	$50	-	-	-
USDT (C = c1 + c2)	$50	$35	$15	$0
Native (c1)	-	$35	-	-
DeFi position (c2, from A)	$50	-	-	-
Total Value (B + C)	$100	$35	$65	$27.5

• Risk status

  • Risk ratio = $27.5 / $65 = 42% ≤ MaxRiskRatio ⇒ OK

  • Leverage = $100 / $65 = 154% ≤ MaxLeverage ⇒ OK

Case2) Building Delta-neutral LP position

step1) Alice wants to provide liquidity to the TON-USDT pair but aims to minimize value fluctuations caused by TON price changes. To achieve this, she balances the amount of TON($66 value) in the $100 of LP with the borrowing amount.

Asset	Supply	Borrow	Net Asset	Risk Value
DeFi position (A = a1+a2)	-	-	-	-
DEX (a1)	$100		$100	$5
Liquid Staking (a2)	-		-	-
TON (B = b1 + b2)	$50	$66	-$16	$6.4
Native (b1)	-	$66	-	-
DeFi position (b2, from A)	$50	-	-	-
USDT (C = c1 + c2)	$50		$50	$0
Native (c1)	-		-	-
DeFi position (c2, from A)	$50		-	-
Total Value (B + C)	$100	$66	$34	$11.4

• Risk status

  • Risk ratio = $11.4 / $34 = 33.5% ≤ MaxRiskRatio ⇒ OK

  • Leverage = $100 / $34 = 295% ≤ MaxLeverage ⇒ OK

step2) Half of the borrowed TON is swapped for USDT and supplied back to the DEX as liquidity. The resulting $66 worth of LP tokens is then used as collateral to borrow additional TON.

Asset	Supply	Borrow	Net Asset	Risk Value
DeFi position (A = a1+a2)	-	-	-	-
DEX (a1)	$100+$66	-	$166	$8.3
Liquid Staking (a2)	-	-	-	-
TON (B = b1 + b2)	$83	$110	-$27	$10.8
Native (b1)	-	$66+$44	-	-
DeFi position (b2, from A)	$83	-	-	-
USDT (C = c1 + c2)	$83		$83	$0
Native (c1)	-		-	-
DeFi position (c2, from A)	$83		-	-
Total Value (B + C)	$175	$110	$56	$19.1

step3) By repeating the previous process, Alice ends up with $200 worth of LP tokens and $100 worth of borrowed TON, creating a position that is neutral to TON price movements.

[Disclaimer] Due to the nature of the DEX LP, the composition of the LP changes as TON price fluctuates, perfect neutrality is unattainable. Instead, this strategy allows for a position with significantly reduced sensitivity to price changes.

Case3) Leveraging LP position

step1) Bob wants to build leveraged LP position by supplying $100 of TON-USDT LP token. Then the user borrowed $33 of TON and USDT each.

Asset	Supply	Borrow	Net Asset	Risk Value
DeFi position (A = a1+a2)	-	-	-	-
DEX (a1)	$100	-	$100	$5
Liquid Staking (a2)	-	-	-	-
TON (B = b1 + b2)	$50	$33	$17	$6.8
Native (b1)	-	$33	-	-
DeFi position (b2, from A)	$50	-	-	-
USDT (C = c1 + c2)	$50	$33	$17	$0
Native (c1)	-	$33	-	-
DeFi position (c2, from A)	$50	-	-	-
Total Value (B + C)	$100	$66	$34	$11.8

• Risk status

  • Risk ratio = $11.8 / $34 = 35% ≤ MaxRiskRatio ⇒ OK

  • Leverage = $100 / $34 = 294% ≤ MaxLeverage ⇒ OK

step2) Borrowed assets can be used as liquidity provision to DEX, minting $66 worth of LP tokens. This LP tokens can then be used as collateral to borrow additional assets.

If Bob repeats this process, he could provide liquidity up to times the initial invested capital.

Asset	Supply	Borrow	Net Asset	Risk Value
DeFi position (A = a1+a2)	-	-	-	-
DEX (a1)	$292	-	$292	$14.6
Liquid Staking (a2)	-	-	-	-
TON (B = b1 + b2)	$146	$97	$49	$19.6
Native (b1)	-	$97	-	-
DeFi position (b2, from A)	$146	-	-	-
USDT (C = c1 + c2)	$146	$97	$49	$0
Native (c1)	-	$97	-	-
DeFi position (c2, from A)	$146	-	-	-
Total Value (B + C)	$292	$194	$98	$34.2

• Risk status

  • Risk ratio = $34.2 / $98 = 35% ≤ MaxRiskRatio ⇒ OK

  • Leverage = $292 / $98 = 298% ≤ MaxLeverage ⇒ OK