Objective Function

The Objective Function is a per-treasury per-Aera vault optimization target for the Aera vault. In practice, a high objective function is achieved when a vault has a high-level of risk coverage of shortfalls and is achieving positive returns.

Risk & Return

The primary objective of Aera is to ensure availability of funds to cover protocol shortfalls. Each vault aims to be hedged against low protocol economic health. While this objective is primarily risk-centric, returns are also an important component for the following reasons:
  • A vault optimizing purely for short-term risk coverage will fail to grow and may cover less funds in the long-run
  • Treasuries seek capital efficiency and want to achieve high risk coverage with the least amount of capital needed.

How is the Objective Function used

Today, the Objective Function is used off-chain to select, evaluate and report on treasury management strategies. As Aera seeks to decentralize treasury management, the objective function will move on-chain as a way to assess and compare objective function outcomes from different parameter predictions.