The Flexible Leverage Index (FLI, pronounced “fly”) lets you leverage a collateralized debt without having to manage a collateralized debt.
The Flexible Leverage Index abstracts collateralized debt management into a simple index, reproducible by an ERC20 token built on Set Protocol.
Introducing BTC2x-FLI
After the successful launch of our first FLI product, the Ethereum Flexible Leverage Index (ETH2x-FLI), leveraging token holders to 2x long exposure to ETH price action, Pulse Inc is now introducing the BTC2x-FLI, to help Bitcoin bulls gain the same exposure.
Characteristics
Bitcoin Flexible Leverage Index
- Underlying Asset: WBTC
- Target Leverage Ratio: 2
- DeFi Lending Protocol: Compound
- Maximum Leverage Ratio: 2.2
- Minimum Leverage Ratio: 1.8
- Recentering Speed: 10%
FLI has several key advantages over Legacy Leveraged Tokens:
- Zero slippage via composable entry and exit.
- Unique Index algorithm reduces rebalancing needs by order of magnitude.
- Emergency deleveraging possible during Black Swan events for additional fund safety.
Flexible Leverage Index
Objective
Flexible Leverage Index enables market participants to take on leverage while minimizing the transaction costs and risks associated with maintaining collateralized debt.
Calculation
Definitions:
- Borrow Rate — the cost to borrow the asset at the DeFi Lending Protocol over the most recent epoch.
- Epoch Length — the time between rebalances.
- Target Leverage Ratio (TLR) — the long-term target for the value of the assets held by the index divided by the value of the debt held by the index.
- Current Leverage Ratio (CLR) — the value of the asset currently held by the index divided by the present value of the debt held by the index.
- Maximum Leverage Ratio (MAXLR) — the highest leverage ratio the index will ever reach after a rebalance.
- Minimum Leverage Ratio (MINLR) — the lowest leverage ratio the index will ever reach after a rebalance.
- Re-centering Speed (RS) — the rate at which the Current Leverage Ratio is adjusted on each period to return to the Target Leverage Ratio, when the index is not being adjusted back to the Maximum Leverage Ratio or the Minimum Leverage Ratio.
Index Price:
FLIt = FLIt-1 * (1 + ((Pricet/Pricet-1–1) * CLRt-1 — (BorrowRatet * (CLRt-1 -1)/CLRt-1)))
Calculation of the new Current Lever Ratio for the period:
CLRt+1 = max(MINLR, min(MAXLR, TLR * (1 — RS) + CLRt * RS))
Thank you for reading. We look forward to hearing your feedback and engaging with the community for any suggestions on the Flexible Leverage Index (FLI) series.
For a more detailed understanding of the Flexible Leverage Index please visit Pulse.inc
