Hedging System
Risk Management, Pricing, Trading, and Backing Orchestration
Last updated
Risk Management, Pricing, Trading, and Backing Orchestration
Last updated
Ethena's "Hedging System" is composed of a number of offchain application services that enable many critical aspects of the user experience, including:
Calculating & publishing indicative prices for minting & redeeming USDe.
Returning pricing to mint & redeem USDe requests.
Ensuring the integrity of the system in real time.
The "Hedging System" ingests & interacts directly with the protocol's onchain smart contracts as well as the Ethereum blockchain.
The "Hedging System" is extremely risk-aware and has been designed in a manner wherein the preservation of protocol collateral is the most important consideration.
At a level lower of detail, the "Hedging System" performs the following functions (but is not limited to):
Ingests market data from CeFi Exchanges, "Off-Exchange Settlement" providers, Pyth and Redstone. This data includes order book updates, public trade information, as well as private portfolio, positions, orders, and trade information.
Normalizes and validates the integrity of market data.
Calculates the risk exposure of the portfolio relative to defined risk limits and goals.
Reconciles internal system information relating to the protocol's portfolio, positions, orders, and trade information with CeFi Exchanges & "Off-Exchange Settlement" providers.
Calculates & publishes indicative prices for minting & redeeming USDe.
Ingests, validates, and publishes pricing for mint & redeem USDe requests.
Determines where to route & execute orders upon a successful mint & redeem USDe request. This incorporates information about fees, depth of liquidity, existing positions, and other funding + basis opportunities.
In real-time, validates all information & operations to ensure integrity relative to internal & external expectations.
Monitors and alerts in regards to the availability of internal & external dependencies such as other internal services or CeFi Exchanges.
Orchestrates the movement of collateral between "Off-Exchange Settlement" providers and CeFi Exchanges.
Publishes & alerts Ethena team members to real-time developments. Enabling immediate manual intervention in the event of inconsistency.
Publishes & logs system data to different data stores. An example being the publication of trade data to a database.
