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Arbitrageur

Description

An arbitrageur will participate in the protocol by taking advantage of discrepancies between NAV (net asset value) and an index token's price on external exchanges. This keeps index tokens in-line with the value of underlying assets, while taking advantage of market inefficiencies for profit.

How to Participate

An arbitrageur would typically participate by minting and selling index tokens, or by buying and burning index tokens. An example of each case has been provided below:
  1. 1.
    If the NAV is above the value of an index token, an arbitrageur may buy the index token asset and burn it for underlying assets, selling these on an external exchange. Note that, in order to retain a profit, this direction must account for exit and swap fees.
  2. 2.
    If the NAV is below the value of an index token, an arbitrageur may mint the index token from underlying assets and sell it on an external exchange. This would allow the arbitrageur to retain profits off of the difference between NAV and token price, after swap fees.
Last modified 4mo ago