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Managing Risk in DeFi Portfolios

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  • Hugo Inzirillo
  • Stanislas de Quenetain

Abstract

Decentralized Finance (DeFi) is a new financial industry built on blockchain technologies. Decentralized financial services have consequently increased the ability to lend, borrow, and invest in decentralized investment vehicles, allowing investors to bypass third party intermediaries. DeFi's promise is to reduce the cost of transaction and management fees whilst increasing trust between agents of the Financial Industry 3.0. This paper provides an overview of the different components of DeFi, as well as the risks involved in investing through these new vehicles. We will also propose an allocation methodology which will integrate and quantify these risks.

Suggested Citation

  • Hugo Inzirillo & Stanislas de Quenetain, 2022. "Managing Risk in DeFi Portfolios," Papers 2205.14699, arXiv.org, revised Sep 2022.
    • Handle: RePEc:arx:papers:2205.14699
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    1. repec:dau:papers:123456789/4688 is not listed on IDEAS
    2. Lewis Gudgeon & Sam M. Werner & Daniel Perez & William J. Knottenbelt, 2020. "DeFi Protocols for Loanable Funds: Interest Rates, Liquidity and Market Efficiency," Papers 2006.13922, arXiv.org, revised Oct 2020.
    3. Chen, Yan & Bellavitis, Cristiano, 2020. "Blockchain disruption and decentralized finance: The rise of decentralized business models," Journal of Business Venturing Insights, Elsevier, vol. 13(C).
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    Cited by:

    1. Deborah Miori & Mihai Cucuringu, 2022. "DeFi: data-driven characterisation of Uniswap v3 ecosystem & an ideal crypto law for liquidity pools," Papers 2301.13009, arXiv.org, revised Jan 2023.

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