Umami v2 GLP Vaults — Initial Backtesting Results and Analysis

By Michael E. (0xPrePop), Chief Technology Officer


  • Annualized Returns, Final Strategy: 26.67%
  • Annualized Returns, Baseline Strategy: 11.8%
  • Worst-Case Drawdown: -4.55% (incl. Trader PnL)
  • Mean Max Delta Exposure: -1.29% (Std Dev. 2.10%)
  • Sharpe Ratio: 1.4


  • Annualized Returns (Final Strategy and Baseline Strategy) are based on backtests covering 8 months of real-world data from Jan.-Aug. 2022. Both figures exclude positive-outlier data from 2 months of highly-favorable Trader PnL in May and June for a more conservative estimate.
  • Annualized Returns, Final Strategy includes capital efficiencies from internal netting and assumes Vault TVL balances that approximately align with asset allocations in GLP.
  • Annualized Returns, Baseline Strategy reflects the performance of a hypothetical standalone USDC Vault and completely excludes efficiencies from internal netting.
  • Worst-Case Drawdown is based on Max Peak-to-Trough during Jan.-Aug. 2022. It includes GLP losses from unfavorable Trader PnL and assumes zero capital efficiencies from internal netting.
  • Max Delta Exposure represents the % of the Vaults’ TVL that is exposed to market-risk from price changes in GLP’s volatile assets. For example, with a Delta exposure of 1.29%, a 1% change in the price of GLP’s volatile assets would impact Vault TVL by 0.0129% (1% * 1.29%).
  • Sharpe Ratio is calculated using the standard formula. It is based on the performance of the Baseline Strategy and assumes a risk-free rate of zero.


Purpose and Methodology

Results and Analysis

GLP Performance

Hedging Considerations

Baseline Strategy Performance

Final Strategy Performance

The Next Steps

  • Optimizing strategy hyper parameters for increased performance.
  • Testing the effects of hedging GLP’s counterparty exposure.
  • Ensuring protection in edge cases, including stress-testing extremely dramatic changes in GLP allocations, prices or TVL.
  • Developing solutions for adapting to dynamic Open Interest caps on GMX.
  • Exploring the impacts of different fee structures.

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Sustainable, Risk-Hedged Arbitrum Yields

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