Smart Deposit Router
A tool to manage pools deposits in a liquidity and pricing optimized manner.
The Smart Deposit feature is based on a standard mathematical procedure called portfolio optimization.
The user submits a total amount for deposit and a market sentiment, and the Smart Deposit computes the fraction of the deposit to be swapped and allocated per pool. Once determined, these allocations are recommended to the user.
An example of a user depositing funds to pools using the Smart Deposit feature.
The user is prompted to select a series of assets which they own, and is then prompted to select their market sentiment. The market sentiment selection has one of three settings: "bullish", "bearish", and "neutral". These settings determine which pools will be considered for deposit: calls, puts, or both.
The total value of their assets is then summed into a single nominal amount. The fractional pool allocations are then determined based on "mean-variance" criterion with respect to the aggregate pool c-values.
The allocations recommended to the user simultaneously maximize the mean c-value and minimize the variance of the c-value across the selected pools, hence they are said to satisfy the "mean-variance" criterion. The c-value is a Premia-specific pool metric which summarizes the utility value of deposits in each pool. Because each c-value summarizes the utility value of its respective pool, the smart deposit recommends an allocation that maximizes the mean c-value across pools, hence maximizing the average utility of the user's deposit.
Severe fluctuations in c-value are assumed a priori to be undesirable, hence the smart-deposit feature recommends an allocation which minimizes the statistical variance of the c-value across pools.