First-loss BTC yield mandate
Interactive pricing for a BTC-denominated, delta-neutral strategy. Every result below updates with the assumptions; no information leaves this browser.
The mandate
The client allocates BTC to a delta-neutral strategy for six months. The strategy averages 11% p.a. with 4.0% annual volatility.
The protection
The manager posts a certain percentage of client capital outside the strategy, and absorbs losses up to that amount.
The exchange
The client gives the manager the fair share of profits. The manager gives the client a put spread on losses. Fee and cover settle only at the window end.
The event is permanent impairment of client margin at a venue that could hold this position. A repaid hack is not an event. A strategy drawdown or liquidation is not an event; that belongs in volatility and the cover.
We count relevant impairments and the years comparable venues were open. The central annual intensity is events divided by venue-years. An exact 95% Poisson interval shows how uncertain that estimate remains. Recovery counts only what is returned before this mandate ends, not distributions years later.
Following the central count estimate.
Mean annual return when no venue event occurs. It changes the yield results, not the fair-fee curve.
Annual volatility of ordinary strategy returns.
2.00 × 2.83% = 5.66% of capital over six months.
Share of impaired margin returned before the mandate ends.
Zero is self-custodied BTC. A market-implied BTC rate can be approximated as SOFR minus the term-matched futures basis.
The orange line uses the adopted hazard; the dashed line uses the upper end of the count interval. The dot is this mandate: 6 months, 4.00% volatility, 5.7% cover, 0.71×, hazard 1.98%, recovery 0% and BTC rate 0.0%.
Conclusion
Indicative economics
Fair performance fee
44.0%
of positive profits
Expected client yield
4.14%
a year, whole distribution
If the average realizes
3.00%
client return over six months; strategy 5.36%, no event