Rates Risk
Last updated
Last updated
On your Risk Overview page, you can view your exposure to changes in interest rates, under My Risk Positions by contract or calendar period (monthly, quarterly, semi-annually, or annually).
Figures displayed under My Risk Positions (with DV01 and USD selected) shows your dollar value (sensitivity) change (in present value) from a 1 basis point (denoted, "bps") increase in each contract's interest rate (denoted as, "DV01").
With a fixed rate lending position, your DV01 would be a negative figure
With a fixed rate borrowing position, your DV01 would be a positive figure
At current, Infinity's fixed rate contracts are up to 4Q (or 1Y) tenor, and therefore pivot points are 3M, 6M and 9M. As we extend the longest tenor (beyond 4Q) of our fixed rate contracts, the below tables and pivot points will be updated accordingly.
Within Rates Risks, some of the key ways the yield curve could behave include:
Parallel Move, up or down
Slope Shift, becoming steeper or narrower
Curvature, becoming (more) convex or concave
Under Parallel Move, your positions along the curve would be sensitive to a +1 bps shift upwards across the entire yield curve.
To view your sensitivity under My Risk Positions, you could aggregate your net positions by month (in the below example) or by contracts, to have a clearer view of your exposure:
| Monthly | WBTC | ETH | USDT | USDC | DAI |
|---|---|---|---|---|---|
For example, the ETH-1W market, the (284) represents the DV01 figure shows that if the 0 (FLOAT) to 1M part of the curve moves up by +1 bps, you would experience a loss of $284 in present value, assuming all else equal (i.e. no changes in FX).
Under Slope Shift, your positions along the curve are calculated with a shift in the slope by making it steeper (shorter tenor rates decrease, longer tenor rates increase) and flatter (shorter tenor rates increase, longer tenor rates decrease). For example,
Flattening the prevailing market's curve would shift the 1D market by +1 bps and 4Q market by -1 bps, leaving the pivot point of 6M (180 days) unchanged
Steepening the prevailing market's curve would shift the 1D market by -1 bps and 4Q market by +1 bps, leaving the pivot point of 6M (180 days) unchanged
On your Risk Overview page, you can approximate your exposure to Slope Shift by aggregating your net positions, along the entire yield curve, on a semi-annual basis, rather than viewing by contract, month, quarterly or annually.
Following on the the example taken above:
Based on the portfolio composition, a flattening of the curve would be favourable for the the H1 contracts of USDT and USDC. As the curve flattens, shorter tenor rates increase and longer tenor rates decrease. This results in a positive mark-to-market for shorter tenor borrowing positions and longer tenor lending positions, under a flattening curve. Similarly for the H2 contracts of USDT and USDC, when (longer tenor) rates go down, you would experience a positive mark-to-market since the aggregate sensitivity would be multiplying a negative DV01 figure (e.g. (119) for USDT in H2) by a -1 bps change in rate (instead of a +1 bps sensitivity shown in the table).
Under Curvature, your positions along the curve would be sensitive to the yield curve's convexity, either becoming more 'convex' or 'concave'. The below example is a yield curve becoming more concave, with the short- and long-end shift lower (by -100 bps) and midpoint (6M) shift higher (by +50 bps). Conversely, the yield curve would become more convex if the short- and long-end increased (+100bps) and midpoint (by -50bps).
To read your exposure to curvature, the best aggregated view under Risk Overview would be by Quarter.
As the curve gets more concave, the 0-3M (Q1) part of the curve goes down, the Q2 and Q3 (3M to 9M) go up while Q4 (9M to 12M) goes down. Therefore, from the above table, we infer:
For ETH, a more concave yield curve would be in favour, as the net ETH positioning sensitivity is negative when the curve goes down in both Q1 and Q4 => the impact is positive
For USDC, a more concave yield curve would not be in favour, as the net USDC positioning sensitivity is positive, with a negative impact on Q1 and Q3 positions
| Semi-Annual | WBTC | ETH | USDT | USDC | DAI |
|---|---|---|---|---|---|
| Quarterly | WBTC | ETH | USDT | USDC | DAI |
|---|---|---|---|---|---|
1M
0
(284)
0
0
4
2M
0
0
0
0
0
3M
(30)
0
104
84
0
4M
8
0
0
0
0
5M
0
0
0
0
0
6M
0
0
0
0
(48)
7M
0
0
0
0
0
8M
0
0
0
(59)
0
9M
0
0
0
0
0
10M
0
(7,754)
(119)
0
0
11M
0
0
0
0
0
12M
0
0
0
0
0
Sum
(21)
(8,038)
(15)
25
(44)
H1
(21)
(284)
104
84
(44)
H2
0
(7,754)
(119)
(59)
0
Sum
(21)
(8,038)
(15)
25
(44)
Q1
(30)
(284)
104
84
4
Q2
8
0
0
0
(48)
Q3
0
0
0
(59)
0
Q4
0
(7,754)
(119)
0
0
Sum
(21)
(8,038)
(15)
25
(44)
