👨‍🏫LET'S LEARN ABOUT RISK PREMIUM👨‍🏫 Recently @ResolvLabs reduced their risk premium to from 30% to 15%. Yuzu, conversely, increased their risk premium from 4.5% to 15%. It looks like 15% risk premium is becoming the new norm. Risk premium is being defined here as the portion of net total yield that goes only to a specific tranche that takes on additional first loss risk. In the case of both Resolv and Yuzu, that's their junior tranche. SO, you can think of a 15% risk premium as 15% of the total yield (net of fees) that then only goes to the junior tranche vault. Formula: 15% * netYield / juniorTranchTVL So the lower the % of TVL the junior tranche is, the higher the yield from risk premium becomes. For example, with an 11% base APR, you can reward a staked senior tranche with a 9.85% APR and a junior tranche with 82.6% APR with a 15% risk premium. Again, that's because the junior tranche is such a low portion of the total TVL (only 2% in this case). HOWEVER, it's important to remember that a junior tranche has 1/juniorTrancheWeight exposure to loss. That would be a 50x loss exposure here, because 1/0.02 = 50. So a 2% loss on the underlying NAV would be a 100% loss for the junior tranche. This is why Yuzu Junior tranche is offering a whopping >110% APR, because it's compensating for that 50x loss exposure. Resolv, however, has about 33% of the TVL in the junior tranche, meaning that its loss exposure is roughly 3x (not 50x). SO, even though both of these protocols have a 15% risk premium, the net yield is dramatically different because of the relative junior tranche weights. THANK YOU FOR COMING TO MY LECTURE, I HOPE YOU LEARNED SOMETHING.

@ResolvLabs Also happy to share my spreadsheet for this for anyone interested